Inflation drops to 1.9% in March
The latest estimate marks the lowest inflation rate since the summer of 2024.
Portugal’s inflation rate continued its downward trend in March, falling to 1.9%, down from 2.4% in the previous month.
The decline was largely driven by stable energy prices, according to preliminary data released by the National Statistics Institute (INE) on March 31.
The latest estimate marks the lowest inflation rate since the summer of 2024 and reflects a slowdown in what economists call “core inflation.”
While energy prices remained stable in March after rising by 1.5% in February, the cost of unprocessed food products increased to 2.8%, up from 2.4% the previous month.
Energy Prices Key to Inflation Slowdown
According to the INE, the year-on-year variation in the Consumer Price Index (CPI) decreased by 0.5 percentage points compared to February. The final inflation figures will be released on April 10.
“The annual rate of change in the Consumer Price Index is estimated to have decreased to 1.9% in March 2025, down from 2.4% in February,” the INE stated in its bulletin.
This decline is primarily attributed to the stabilization of energy prices, which saw no change in March after an increase the previous month.
Core inflation, which excludes volatile items such as unprocessed food and energy, also slowed to 1.9% in March, down from 2.5% in February.
Comparing Inflation Trends Across the Eurozone
To measure inflation across European Union countries, the Harmonized Index of Consumer Prices (HICP) is used.
In March, Portugal’s HICP inflation rate dropped from 2.5% to 1.9%, aligning with the overall trend of easing inflation in the eurozone.
This index differs from the CPI as it includes spending by both residents and tourists, giving greater weight to services such as hospitality and dining.
The HICP’s drop signals a broader slowdown in inflationary pressures, though the price of unprocessed food continued to climb.
Impact of VAT Policy Changes
One factor influencing food prices is the phase-out of Portugal’s Zero VAT policy, which temporarily exempted essential food items from value-added tax.
Since its removal in early 2025, fresh food prices have steadily increased, contributing to inflationary pressures in that category.
On a monthly basis, inflation rose by 1.4% in March, compared to a 0.1% decline in February and a 2.0% increase in March 2024.
The INE also estimates that the 12-month average inflation rate now stands at 2.4%, slightly lower than February’s 2.5%.
Final inflation data for March will be officially released on April 10, providing further insights into the evolving economic landscape in Portugal.