Spain's CPI holds near 5% in October, compounding ECB concerns

• Spain October preliminary CPI +4.9% vs +4.9% y/y expected
• Prior +4.9%
• Spain October preliminary HICP +4.9% vs +4.9% y/y expected
• Prior +5.0%

Spanish consumer prices stayed close to 5% in October, with early estimates showing more of the same unwelcome picture. The headline annual inflation rate held at 4.9%, while the harmonised figure edged down slightly to 4.9%. That hasn't shifted much from the increases seen in previous months, which were driven by surging energy costs tied to the Middle East conflict.

The persistence of higher oil prices is likely to keep adding to inflationary pressures through the fourth quarter.

Core annual inflation came in at 3.1%, unchanged from September. That level remains far above what the ECB views as acceptable, as price increases continue to drift from the 2% target.

Coming on the heels of France's report earlier, this data reinforces the idea that the inflation problem is growing larger and more menacing for the central bank. At the same time, weakening economic growth is raising the risk of stagflation.

Policymakers therefore face a precarious situation: they must contain price pressures before they spiral while also avoiding a severe economic downturn. A tough balancing act.