Last Wednesday the INE published the final Spanish inflation data for June. A general rate of 1.9% per year, below the magic barrier of 2%.
If we only stay with this headline, it would seem that prices have finally been able to stop, but unfortunately this is not the case. The underlying figure, the one that removes energy and fresh food, which is the inflation that matters to the ECB, stands at 5.9% per year.
And if we look at our European neighbours, the picture is similar. The underlying rate for the euro zone as a whole in June stood at 5.4% annual. But, more than the number, the key is in the reasons for this behavior. And this has a lot to do with the dichotomy between industry, whose prices are moderating thanks to the fall in energy and transport prices, and the fewer supply problems, and services, whose prices continue to rise (and the holiday months don’t help).
With these figures, it is not surprising that practically the entire financial industry takes it for granted that the ECB will raise rates again on July 27, at least another 25 bp, up to 4.25%.
What’s more, it is quite probable that it will repeat this movement in September, up to 4.5%. A priori, this should be the final type. But, as always, it will depend on the evolution of the economic situation, and therefore, on prices. What is expected is that the European economy slows down next winter, but does not fall into recession. Therefore, it may be that with the next two climbs we will reach the end.
But beware, we probably won’t see rate cuts until 2025.
