Agência para o Investimento e Comércio Externo de Portugal


Harmonized inflation surged to 7.5% in March, from February’s 5.9% reading, marking the highest print since 1997.

Therefore, inflation moved further above the European Central Bank’s target rate of 2.0%. March’s result was due to faster increases in prices across the board for food, alcohol and tobacco, energy, non-energy industrial goods, and services, amid the impact of the war in Ukraine.

On a monthly basis, harmonized consumer prices soared 2.5% in March, above February’s 0.9% increase and marking the fastest increase on record. Core inflation, which excludes volatile energy and unprocessed foods prices, rose to 3.2% in March from February’s 2.9%, also marking the highest print since 1997.

The war in Ukraine is driving up inflation via second-round effects, originating from high energy prices and affecting a wide array of products and services. These dynamics are currently exacerbated by renewed Covid-19 restrictions in China upsetting supply chains. It is unclear how long this status quo will continue.

Commenting on the release, Bert Colijn, senior economist at ING, noted the high current level of uncertainty surrounding the inflation outlook:

“The immediate developments of inflation are highly conditional on developments in the war. That makes any short-term expectations more prone to error than usual, but our base case suggests an even higher reading in April at least, on the back of lagged developments in consumer food and gas prices. Even a double-digit inflation print cannot be ruled out at this point.”

FocusEconomics panelists see inflation averaging 3.5% in 2022, which is unchanged from last month’s estimate, before ticking down to 2.7% in 2023.