After the descent registered in February, the inflation rate in Portugal rose slightly again during the month of March, confirming expectations that the rapid disinflation process registered in the second half of last year will now be carried out more slowly.
According to the quick estimate published this Thursday by the National Institute of Statistics, prices increased by 2% during the month of March, causing the year-on-year inflation rate (which represents the variation in prices compared to the same month) last year) went from 2.1% in February to 2.3% in March.
This time, both energy prices and food prices registered small variations throughout the month of March. In the case of energy, they rose by 0.1% compared to February and in the case of unprocessed food, they increased by 0.3 %.
This meant that, due to the base effect, the annual inflation rate for energy goods rose from 4.3% to 4.8% and that in the case of unprocessed food goods it fell from 0.8% to -0.5 %.
Therefore, behind the rise in inflation recorded in March were mainly other types of goods. The underlying annual inflation rate – which is very relevant for the decision-making of the European Central Bank (ECB), as it removes from the analysis the evolution of food and energy prices, which are normally more volatile – recorded an increase in March from 2.1% to 2.5%, interrupting a downward trend that had been occurring for several months.
The results now known confirm that, after quite sharp declines throughout the second half of 2023, the inflation rate in Portugal shows, now that it is close to 2%, that a decline, if it occurs, will always be done in a more slow.
Inflation data over the course of this month and next will play, at the euro zone level, a fundamental role in the decision-making of ECB officials regarding interest rates. Christine Lagarde and the other members of the board of governors will decide in meetings scheduled for April and June whether to start lowering interest rates, but for this to happen they want to continue to see price variations showing a downward trend, particularly in the which concerns the underlying inflation rate.
Data relating to March inflation for the eurozone as a whole will only be revealed by Eurostat next Tuesday.
