Spain’s inflation accelerated in March as the government persisted in withdrawing support that had previously helped mitigate the impact of surging energy expenses.

According to data released on Wednesday, consumer prices increased by 3.2% compared to the previous year. This figure slightly falls short of the average estimate of 3.3% in a Bloomberg survey of economists.

Not taking into account energy and certain food costs, core inflation also fell more than forecast, to 3.3% from 3.5%.

This indicator aligns more closely with the trend observed across the eurozone as the region's unprecedented surge in prices diminishes, Bloomberg reports.

This retreat is gradually bringing the European Central Bank's (ECB) target of 2% into focus, prompting officials in Frankfurt to consider convening around June to begin reducing the deposit rate from its current record high of 4%.

For the entire bloc, inflation is projected to decline to 2.4% this month, as per Bloomberg Economics. However, a nowcast model indicates it might dip even further, potentially reaching as low as 2.2%, factoring in the most recent Spanish data. Eurostat is scheduled to release this reading on 3rd April. 

Additionally, both France and Italy are expected to report their figures this Friday.

Following Spain's release, the euro and regional government bonds remained stable, indicating minimal impact on the rates outlook. The market anticipates that the ECB will make its initial cut in June, followed by at least two additional quarter-point decreases by the end of the year.

At the time of writing, the single currency was trading flat at around $1.08, whilst the yield on two-year German bonds fell three basis points at 2.84%.

“The uptick in Spain’s harmonised CPI inflation is unlikely to be cause for concern. The broad direction of price gains over the rest of the year is down, but it will be a bumpy descent, in part due to the government’s decision to gradually reverse energy tax cuts – we expect headline inflation to tick up over the coming months,” said Jamie Rush, chief European economist at Bloomberg Economics.