Spanish Inflation Slowdown Supports ECB Officials

The European Central Bank officials who claim that the historic price spike on the continent is fading and interest-rate increases can soon end are supported by the Spanish inflation slowdown, which was greater than expected. Also encouraging was the fact that the measure of inflation that does not include the costs of energy and some food items decreased for a third consecutive month, despite remaining high at 6.1%.

Following the release of the data, government bond prices rose and the euro's declines continued, falling 0.3% to a two-month low of $1.0673. Although traders reduced their bets on rate increases in the future, they are still pricing in another half-point increase this year.

The consumer price data released on Tuesday is the first of many to come from the area. France, Italy, and Germany release their reports on Wednesday, followed the next day by the 20-nation euro area.

While Spain has recently boasted the lowest inflation rate among the biggest economies in the euro zone, it is currently exhibiting the same trend: a faster decline in headline price increases than in the core measure.

Economists and investors anticipate at least two more quarter-point rate increases to come, with ECB officials primarily observing the latter as a guide to when to end their historic monetary-tightening campaign. To get inflation back to the desired 2% level, some policymakers believe increases could continue through September, possibly raising the deposit rate to 4% from its current level of 3.25%.