Funcas estimates that inflation will rise again in November and December and the average annual rate will be 3.6%

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Funcas estimates that inflation will rise again in November and December and the average annual rate will be 3.6%

Funcas estimates that inflation will rise again in November and December and the average annual rate will be 3.6%

  • The impact of reversal of all anti-inflation measures can be estimated at 1.5 points on the inflation rate.

madrid, 14/11/2023, The year-on-year inflation rate stood at 3.5% in October, following a 0.3% increase in CPI. The underlying rate fell six-tenths to 5.2%. The result has been better than expected, both in underlying and general terms, in the latter case due to the strong and unexpected decline in fuel prices, especially electricity prices. Processed foods reduced their inflation rate by six tenths to 10.2%, bucking the downward trend recorded since the spring. A clear decline in inflationary tensions has been observed within this group, except for oil, whose inter-annual rate has increased to 73.5%. Among the most volatile groups, unprocessed foods reduced their inflation rate to 7.3%, while energy products’ inflation rate dropped from -14% to -10.4%. Therefore, the process of inflation reduction continues in large groups, except for energy products, whose growth is more volatile.

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Funcas expects inflation rates to rise again in November and December to an annual average of 3.6% due to the impact of moves in energy prices. For 2024, the forecasts are more uncertain because they will be based on the timing of the withdrawal of anti-inflation measures (VAT on food, taxes on energy, public transport prices, etc.).

Funkas estimates that the normalization of VAT on food could increase the inflation rate by 0.4 percentage points. Withdrawal of measures affecting electricity and gas would mean another thing. And finally, eliminating discounts on public transportation would add a tenth. In short, the impact on CPI with all measures reversed is estimated to be 1.5 points higher than the inflation rate. These forecasts assume that slightly more than half of the impact will occur in 2024.

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Overall, the average annual growth rate of the general index in 2024 will be 3.6%, while the annual average of the underlying index will be 3%.