The persistence of inflation in the eurozone has led the European Central Bank (ECB) to raise interest rates by 25 basis points, the first hike in three years and perhaps not the last if prices continue to show an upward trend. The decision comes after inflation in the eurozone has again exceeded the 3% threshold, a level that has set off all alarms. It is worth recalling that the ECB's primary mandate is to maintain price stability and keep inflation below 2%. The measure, therefore, has a clear justification: to reduce consumption. However, as with all economic decisions, the measure also has negative consequences. The rate hike makes access to credit more expensive for families and businesses, variable-rate mortgages will see their installments increase, loans will become more expensive, and financing conditions will tighten.
In Spain, the situation is especially worrying. Prices rose again in May and have now accumulated five consecutive months above 3%. The moderation seen in energy and food costs has been offset by the increase in services, which continues to exert strong pressure on the CPI, and the outlook for the coming months is not particularly optimistic. Since June 1, the government has eliminated several tax measures that had helped contain energy costs, such as the reduction of VAT on electricity and gas and the Tax on Electricity Generation, the effect of which we will see in the bills of households and businesses in the coming months.
In this context, we will see whether the stability of oil traffic through the Strait of Hormuz seen in recent hours is consolidated, although inflation will continue to be one of the main economic challenges in the coming months. Its impact on households' purchasing power, savings capacity, and the cost of financing will continue to condition the decisions of both households and businesses, while the ECB keeps the door open to further rate hikes if prices do not show a clear and sustained slowdown.
