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Date Published: 22/03/2023

ARCHIVED - Food prices set to increase again as Bank of Spain revises inflation upwards

ARCHIVED ARTICLE -

The CPI forecast for groceries in Spain has been hiked up 4 points by the experts to 12.2%

<span style='color:#780948'>ARCHIVED</span> - Food prices set to increase again as Bank of Spain revises inflation upwards

"The price of food has not peaked," comes the ominous warning from the General Director of Economy and Statistics of the Bank of Spain, Ángel Gavilán, after the financial projections for 2023 were released on Wednesday March 22.

The financial entity has now revised upwards its forecast of inflation for food for 2023, predicting that groceries in general will see price hikes of 12.2% instead of the 7.8% put forward at the end of last year.

A big factor in the calculations, according to Mr Gavilán, is that in Spain food has a bigger impact on general inflation than the rest of the Euro zone. However, the VAT reductions implemented by the Spanish government on staple grocery items at the beginning of the year have helped matters considerably, pulling overall inflation down in January.

"This is consistent with a transfer of approximately 90% of the tax reduction to consumer prices, which was maintained in February," explained Gavilán.

Furthermore, in recent months supermarkets have had no choice but to tack on the extra they are paying in production costs to shopping bills, a fact that hasn’t gone unnoticed by the average consumer.

Looking ahead to 2024, the Bank of Spain calculates that the average for food inflation should be around 4.6%, compared to the 2.6% estimated in the last report, while in 2025 it will likely reach 2.9% --versus the 3.3% previously forecast.

While the future projections for food costs are a little more positive, in the coming months the Bank of Spain expects the impact of the rise in mortgage interest rates to become more pronounced. This can only affect household consumption, but to what extent will depend largely on the financial stability of the household, and the type of home loan it holds.

Now read: More than half of businesses in Spain plan to raise their prices during 2023

Image: Freepik

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