Publications

In February, the BCRP kept the rate at 4.25% for the fifth straight month. This move, expected by the market, reflects a neutral stance with activity near potential and inflation converging to the midpoint of the target range. We expect the rate to stay at this level in the coming months.

Food prices drove headline inflation for the month, while seasonal components hit a 10-month high. Increased forward-looking inertia has prompted us to revise our 2026 projection from 20% to 22%.

Spain grew by 2.8% in 2025, driven by employment and domestic demand. Growth has been more extensive than intensive, with productivity remaining stagnant. Immigration has boosted employment and GDP per capita. The challenge is to raise both employment and productivity by increasing investment and improving its efficiency.

Spain is reducing its deficit and risk premium thanks to economic growth, even in the absence of an approved budget. However, net primary spending is rising above what was committed, and if the cycle cools, confidence could deteriorate.

Non-tourism service exports have consolidated their position as the most dynamic segment of Spain's foreign trade sector, driven by business and ICT services, with the EU and the US as the main markets. Spain is making progress but still has a structural gap with the EU that reveals potential for expansion.

Consumer inflation came in at 4.84%, above both consensus (4.2%) and our expectation (4.3%) in Jan26, while annual inflation edged down only marginally to 30.7%. Despite rising upside risks, given the uncertainty around the effects of recent restrictive policy steps, we maintain our year-end inflation forecast at 25%.

The national unemployment rate stood at 8.9% in 2025, down from 10.2% in 2024, marking the lowest level on record since data have been available. This outcome occurred in a context where the labor force expanded (2.0%), while employment grew at an even faster pace (3.4%).