Spain's central bank on Friday in Madrid marked up its inflation view to 3.9% for this year and expects the rate to slow to 3.7% in 2027, well above its previous 2.6% estimate. It also sees the economy holding up better than many expected: gross domestic product is set to rise 2.6% in 2024 and 2.2% in 2027, with both figures higher than in June. For context, inflation across the euro area is projected at 3% in 2026.
Central bank forecasts set expectations for wages and borrowing costs. Market Briefs covers European inflation free every weekday.
"Energy prices have risen across the board, driving inflation higher," the Bank of Spain said. It noted Spain's recent price pickup has outpaced the rest of the region, with the differential stretching from 0.5 point in April to 1.2 points in September. The bank added that "at the beginning of 2027, inflation is expected to pick up, reflecting the end of energy tax cuts and public transport discounts, before subsequently embarking on a downward path."
According to the central bank, "developments in housing investment are one of the factors shaping the outlook for economic activity over the coming quarters." Prices have climbed amid a housing deficit put at 750,000 units, which could swell to 1 million in 2028. The supply response has fallen short amid labor constraints, rising building costs, and, in particular, snags in urban development projects.
Politics are in the mix too: Following a parliamentary block of his proposal aimed at curbing soaring housing costs, Spanish Prime Minister Pedro Sánchez announced an early election for Nov. 29. Put together, firmer inflation and resilient growth suggest price pressures and the housing squeeze will keep showing up in everyday budgets before they fade.
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