U.S. Markets

Spain's inflation highest in over a year in May; oil prices a factor

MADRID (Reuters) - Spain’s consumer prices rose in May at their fastest pace since April 2017, topping the European Central Bank’s target level as fuel costs increased having fallen a year earlier.

EU-harmonised prices rose by 2.1 percent year-on-year, Wednesday’s flash data from the National Statistics Institute (INE) showed, compared with a consensus forecast of 1.7 percent and a April reading of 1.1 percent.

Spain is the first large euro zone economy to report consumer prices for May. Germany will also publish figures on Wednesday that expected to show a jump to 2 percent.

Weak inflation across the euro zone has encouraged the central bank to keep interest rates at record lows.

Headline consumer prices are expected to be above the ECB’s target of just below 2 percent this summer, but the bank’s preferred measure is the core rate, which strips out volatile oil and food prices and has been consistently lower.

Inflation expectations together with economic growth, which has turned more sluggish, are also variables in the ECB’s plans for its bond-buying scheme, which it is expected to end later this year.

Spain’s national consumer price index rose by 2.0 percent, INE said, up from 1.1 percent in April, also the highest since April last year.

Reporting by Paul Day; editing by John Stonestreet