Inflation latest publications
Part of the higher inflation we are seeing in Spain is due to a recovery in demand thanks to strong progress in the COVID-19 vaccination drive and economic support policies. Another part is explained by factors that could slow down growth.
No surprises came out of last Thursday's ECB meeting, with the expected announcement of a reduction in asset buybacks under its pandemic emergency purchase program (PEPP). The big decisions on monetary policy measures will have to wait until its meets on December 16.
Inflation in August had a monthly variation of 0.45% and stood at 4.44% in annual terms. Foodstuffs continue to be the protagonists in recent increases, although price increases in other goods and services that are highly dependent on the exchange rate.
Looking at what lays ahead for us in the last few months of the year in the global economy, unfortunately the situation has not yet normalized.
Financial markets began the year on a positive note. The progress made in vaccinations, central bank support and the fiscal stimulus programs planned for Europe and the US, helped drive expectations of an economic recovery.
At the end of 1H21, both headline and core inflation remained stable, although at opposite extremes. The former, very high at 2.7% yoy, and the latter relatively low, at 0.2% yoy. Short-term risks exist of a rise in core inflation.
In 2021 and 2022, economic growth will be driven by the strong dynamism of internal demand and the global economy. Transitory factors will put pressure on inflation and the risk that it will take time to return, with higher activity, will lead the Central Bank to begin a tightening cycle of rates in late 2021.
We upwardly revised the 2021 GDP growth forecast to 6.3% from 4.7%. Banxico will continue increasing the reference rate for the rest of the year unless inflation drops more-than-expected.