Spain’s harmonised inflation rate this morning fell sharply from 9.8% to 8.3% - market had expected 9%. The reason for the fall was due to a fall in energy prices following the 21% m-o-m rise in electricity/gas prices in March and the 15% rise in vehicle fuel costs. The role that non-core components have played in the latest decline in Spain’s headline inflation rate can be seen by looking at core inflation – which rose from 3.4% to 4.4% in April (national, rather than HICP, basis), its strongest pace since the mid-1990s. This move in core inflation will likely be a more important event for ECB policymaking (should it be replicated across the euro area) than the energy-driven volatility seen in headline inflation.