Spain's Inflation Surges to 5%, Fueling Rate Hike Expectations

Spanish inflation unexpectedly surged to 5% in September, exceeding expectations and underscoring the need for further interest rate hikes. The country's consumer price index rose from 4.6% in August, marking its highest level since February 2023. Fuel and package holidays were key contributors to the increase.

The news comes as Europe grapples with a resurgence of energy costs due to the Iran conflict. Despite this, Spain's economy has shown surprising resilience, with growth projected at 2.3% for 2023 and 1.7% in 2027.

ECB President Christine Lagarde reiterated that inflation is still under control, citing 'measured response' as necessary to keep prices in check. However, markets are pricing almost four more quarter-point rate hikes in this cycle.