At first glance, the inflation numbers in German states and Spain today might suggest that price pressures are cooling but I've mentioned countless times already that it comes with a very important caveat.
The drop in headline annual inflation is largely to do with base effects coming into play, considering the spike in oil prices last year as a result of the Russia-Ukraine conflict. That is resulting in an adjustment to the headline annual inflation numbers that we have seen today.
But when you take a look at core annual inflation in the Spanish report, it is still at a very high level i.e. 7.5% in March when compared to the 7.6% reading in February. Not only that, the monthly figures all also continue to reaffirm an increase in price pressures (and this is one that I would argue will be of more importance in the months ahead).
It will take months to sort things out and have a better feel of where inflation may be headed, so jumping the gun to bet on lower yields and lower inflation after just one month's worth of data is a bit premature to say the least.
