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In the month of March, the annual rate of the Consumer Price Index (CPI) decelerated seven tenths to 0.0%. Inflation moderated significantly, in line with the decrease in energy prices derived from the evolution of the price of oil. In turn, core inflation remained very stable, confirming the absence of inflationary pressures in the Spanish economy.

Thus, core inflation maintained its variation rate at 1.1%, a rate very similar to that recorded during the last six months. Analyzing its components, it is observed that all of them continue to show very contained increases. The prices of services decrease their variation rate by one tenth, to 1.4%, and the prices of industrial goods without energy products also decreased by one tenth to 0.3%, while processed foods, beverages and tobacco remain at 1.3%.

Prices of unprocessed food increased their variation rate by 1.2 points and stood at 3.9%, making it the most inflationary component of the basket. Virtually all unprocessed foods show price increases, with the largest increases in the last month being concentrated in the headings of fresh and frozen fish, different types of meat and fresh fruits.

Energy prices in the month of March intensify their rate of decline. Specifically, the interannual rate in this month of the prices of energy products has been -9.7%, compared to -3.3% the previous month.

In March, the price of oil fell by 43% compared to February, with Brent crude at $ 32.15 / barrel, 54.1% less than a year ago. The slowdown in activity, as a consequence of the health crisis of COVID-19, has been joined by the lack of agreement in OPEC +, which has led to a price war and an announcement of an increase in production by Saudi Arabia. Thus, the lower demand for oil together with the increase in supply are driving prices to magnitudes that have not been seen since 2001, trading in the last days of March and in the first days of April significantly below $ 20 / barrel. .

However, an agreement has recently been reached within OPEC + to cut production from May to which more countries could join to try to stabilize prices, which would achieve a gradual increase in prices to around $ 40 / barrel at the end of the year. In any case, throughout the year, prices are expected to be significantly below those of 2019, which will put downward pressure on inflation.

The Harmonized Index of Consumer Prices (HICP) stood at 0.1% in March, eight tenths less than in February, and the average index of the Economic and Monetary Union also decreased five tenths to 0.7%, according to collects the advanced indicator from Eurostat. Thus, the negative differential with the euro zone is increased.

Looking ahead to the coming months, in line with the evolution of oil prices, a significant moderation in inflation is expected, which will reach negative rates in the coming months. The evolution will depend fundamentally on crude oil prices and the effects on economic activity derived from the temporary extension of the coronavirus crisis.



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