Inflation remains at 3.2% in June and anticipates the end of some anti-crisis measures this Monday

Spain's inflation rate remained unchanged at 3.2% in June, despite the expiration of tax reductions on electricity and gas bills. This figure, released by the National Statistics Institute (INE), indicates that prices across the country were, on average, 3.2% higher compared to the same period last year. The data shows that the annual inflation rate has stayed steady since April and May, even though fiscal measures aimed at lowering energy costs ceased to take effect on June 1.

The tax reductions on electricity and natural gas, along with related products such as firewood and pellets, ended on June 1. These had been temporarily reduced from the standard VAT rate of 21% to 10%, and the special electricity tax was lowered from 5% to 0.5%. However, these changes did not significantly impact the overall inflation rate due to other factors balancing them out. Specifically, fuel prices contributed to a downward pressure on inflation, partially offsetting the rise in energy costs. Fuel continues to benefit from reduced taxes, including a lower VAT rate and reduced hydrocarbon taxes, which the government decided would remain in place until inflation reaches 15%.

According to the INE, while electricity and gas prices contributed to the upward trend in inflation, the decrease in fuel prices helped maintain the overall rate. This balance suggests that although the removal of certain tax breaks could have led to a more pronounced increase in inflation, their effects were counteracted by the decline in fuel costs. The government had previously outlined that these fuel-related benefits would stay active unless inflation reached 15%, a threshold that has not yet been crossed.

Following this week’s Cabinet meeting, scheduled for Monday, the government will announce whether it will extend existing support measures into the summer months or introduce new ones. The meeting, described as routine given that no session is planned for tomorrow, will provide clarity on the government's economic strategy moving forward. Officials emphasized that the government intends to continue supporting families and sectors most affected by the crisis, particularly transportation, agriculture, and industry. At the same time, they noted that the gradual reduction of uncertainty over recent months allows for a more measured approach to adjusting policies without withdrawing essential support from those who need it most.

The underlying inflation rate, which excludes volatile components such as energy and fresh food prices, decreased slightly to 2.9%. This decline reflects a moderation in some tourism services, indicating that while core inflation remains under control, there is room for further stabilization in other areas. The government’s ability to manage inflation effectively amidst ongoing economic challenges highlights its efforts to balance fiscal responsibility with social protection.

As the government prepares to outline its plans following the Cabinet meeting, stakeholders are watching closely to see how policy adjustments might affect both consumer spending and business operations. The continuation or modification of current support measures could influence economic confidence and consumer behavior during the summer season. With inflation remaining stable but not declining, the focus remains on maintaining economic stability while addressing the needs of vulnerable groups and critical industries.