Spain’s annual inflation rate stabilized at 3.2% in May, according to the National Statistics Institute (INE). However, the INE revised its estimate for the underlying inflation rate – which excludes volatile food and energy prices – upwards to 3%. This stabilization precedes the anticipated end of VAT reductions on electricity and gas, potentially signaling future price increases. The government is currently evaluating whether to extend existing fiscal measures implemented to mitigate the impact of rising energy prices, exacerbated by geopolitical tensions including the situation in Iran. The underlying rate increase suggests broader inflationary pressures beyond energy costs are present in the Spanish economy. Further policy decisions regarding energy subsidies will likely influence the country’s inflation trajectory in the coming months. These developments are being closely monitored for their impact on household budgets and economic stability.