panish inflation eased in December but remained well above the euro-area average, supporting the case for the European Central Bank to keep interest rates unchanged.
(Dec 30): Spanish inflation eased in December but remained well above the euro-area average, supporting the case for the European Central Bank (ECB) to keep interest rates unchanged.
Consumer prices rose 3% from a year earlier, down from 3.2% in November and in line with economists’ expectations, data published on Tuesday showed. Inflation has been at or above 3% for four months now, after previously being under that level for more than a year.
Statistics agency INE said the slight slowdown was due to a drop in fuel prices, with leisure activities also contributing. A gauge of underlying price pressures that excludes energy and some food costs held at 2.6%.
The ECB left borrowing costs on hold at its final decision of 2025, and markets and most economists predict that the period of rate cuts is now over. Policymakers expect rates to remain at 2% for some time unless there are significant new developments, and some have hinted that the next move — albeit far off — will be a hike.
Spain’s figures are the first for this month from a major eurozone economy, with the holiday season delaying most other releases until Jan 6 and 7. The currency bloc has seen inflation readings around 2% for most of 2025.
“More progress is likely going into 2026, as the rise in energy taxes falls out of the annual figures. For the year as a whole, we see headline inflation averaging close to the ECB’s 2% target. With the economy operating above capacity, the risk is the descent is slower than we anticipate,” says Ana Andrade, economist at Bloomberg Economics.
Bank of Spain revised its projections for the country’s economy last week and now expects inflation to reach 2.7% in 2025, up from the 2.5% forecast in September. It also raised next year’s figure to 2.1% and said inflation risks are tilted to the upside.
Spanish growth is expected to be higher than previously thought, thanks to stronger consumption, investment and reduced global uncertainty, according to the central bank. Gross domestic product is set to increase by 2.9% this year, up from the 2.6% projected in September.
Speaking after the latest ECB Governing Council meeting, Bank of Spain governor José Luis Escrivá struck a cautious tone on the future path of borrowing costs, saying policymakers are comfortable keeping rates on hold for the time being while they assess inflation risks.
“In a context of high uncertainty going forward, even though we are systematically meeting the objective of being around 2%, we do not know in which direction the next move will be, nor how long we will keep rates at this level,” Escrivá said. “We have complete optionality.”