Spain's government has extended a 20-cent per litre tax cut on petrol and diesel until the end of the year, as inflation remains stubbornly high. The country's inflation rate stood at 4.9% in October, the highest since February 2023, according to the INE. This marks the third consecutive month above 4%, double the European Central Bank's target of 2%. The price of diesel has surged by 36% over the past year, while petrol has risen by more than 20%, driven by the war in Iran.
The tax cut, part of the government's anti-crisis shield, has provided some relief, with petrol prices falling by 6.1% compared to September. However, diesel prices rose by 1.2%, and gas prices increased by 5.2%, pushing up housing inflation to 7.6% year-on-year. The government's Tur tariff cap on natural gas, set at 15%, will also remain in place until the end of the year.
Other factors influencing inflation include a slower decline in package holiday prices and rising food and clothing costs. The core inflation rate, excluding energy and fresh food prices, was confirmed at 3.1%, the highest since March 2024. The CPI rose by 0.6% month-on-month, higher than the previous month's increase.
The ongoing war between the US and Iran has contributed to nine consecutive months of rising inflation, prompting upward revisions in forecasts. Think tank Funcas now expects inflation to remain around 4.5%, while the Bank of Spain has raised its 2026 average inflation projection to 3.9%. The HICP, used for international comparisons, stood at 4.9%, slightly lower than the previous month.