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Although core inflation remained at 7.5%, the CPI fell to 3.3% in March

The positive CPI figure for March was overshadowed by developments in core inflation. A leading indicator from the National Statistics Institute forecasts annual consumer price index inflation of 3.3% for March 2023.

If the data prove accurate, the annual rate would fall by more than two and a half points, as the deviation in February was 6%. Since August 2021, when core inflation was also 3.3%, the March figure represents the lowest inflation rate.

A preliminary statistical analysis shows that this downward trend is mainly due to fuel and energy prices rising in March 2022 and falling this month.

By contrast, the estimated annual rate of change in core inflation (core CPI excluding unprocessed food and energy) declined by only one tenth of a percentage point to 7.5% in the third month of the year. The CPI thus reached its highest level in more than 40 years, 4.2 percentage points above the core CPI.

Consumer prices increased by 0.4 per cent in March compared to February, the monthly indicator shows. The Harmonised Index of Consumer Prices (HICP), meanwhile, showed an annual rate of change of 3.1%, almost three percentage points less than the previous month. The estimated monthly change of the HICP is 0.11%.

The data published by the INE are a preliminary estimate of the final CPI and HICP data to be published next month. We can follow the evolution of rental prices in the third month of the year thanks to the final statistics, which provide disaggregated data for the different components of the index.

In February, rents rose by only 2% year-on-year, just in line with the ceiling set by the government last March. Prices rose by 2% for the second time this year.

Given that the government decided at the end of last year to extend the rent review cap until the end of 2023, the rental inflation rate is likely to remain at this level in the coming months.

Alongside the creation of a new rent index, which will come into effect in 2025 and will control the maximum rent renewal advance, the government also plans to raise the rent ceiling to 3% in 2024, in the course of discussions on the Housing Act.