In December, inflation in Spain fell again and reached its lowest point in more than a year. Eurostat also endorsed the low percentage and confirmed that Spain has the lowest inflation rate in all of Europe at 5.5%.
According to the price index (IPC), average prices in Spain were 5.5% more expensive in December 2022 than a year earlier. Although this percentage is still quite high, that 5.5% is a sign that the high inflation rates of the last year have passed their peak. In Spain, this figure has been falling for five months in a row. Furthermore, nowhere in Europe is inflation as low as in Spain at the moment.
European Central Bank raises interest rates to lower inflation
Since the war in Ukraine and the high inflation, the European Central Bank (ECB) has raised interest rates several times. Central banks raise interest rates to combat skyrocketing inflation. Inflation occurs when demand for goods and services exceeds supply. Consequently, that drives up the price. Also, higher interest rates make borrowing more expensive. Therefore, businesses and consumers will then borrow less. That then pushes demand down, which should lead to lower inflation.
The ECB believes an inflation rate of around 2% is ideal. At the end of 2022, the average inflation of all European countries was no less than 9.2%. That was already a decrease compared to November 2022, when the average inflation rate in Europe was 10.1%. Some countries showed outliers last December, such as Latvia (20.7%), Lithuania (20%) and Estonia (17.5%).
How does Spain get such low inflation figures?
The cause of Spain’s lower inflation can be traced to the drop in electricity production costs and lower fuel costs. Spain is also less dependent on Russian gas and the Spanish government has taken measures to control consumer prices. Prime Minister Sánchez said he was happy with Spain’s figures. He assured that the measures taken by his government earlier in 2022 and which will be continued in 2023 have indeed proven their effect.