What is the IPC and how does it affect your daily life?

What is the IPC?

The IPC (Índice de Precios de Consumo, Spain's Consumer Price Index) is the indicator that measures how the prices of the goods and services consumed by an average Spanish household evolve. It is published monthly by the INE (National Statistics Institute) and is the official reference for inflation in Spain.

When you hear "inflation is at 3%," it means the IPC has risen 3% compared to the same month the previous year. In other words: what used to cost €100 now costs €103.

How it's calculated: the shopping basket

The INE doesn't measure the prices of everything that exists, but rather of a representative basket of goods and services that reflects typical spending by Spanish households. This basket has more than 480 items grouped into 12 categories:

The weight of each category reflects how much an average Spanish family spends on it. Housing and food together account for more than 50% of the IPC.

Why the official IPC isn't "your" inflation

Here's the key point many people don't understand: the IPC measures the inflation of a hypothetical average household, not yours.

If you rent in Madrid or Bilbao, your housing component is far above the national average. If you don't own a car, transport barely factors into your real spending. If you have three children, you spend much more on food than average.

What's more, the overall IPC weights things differently depending on the moment:

• In 2022, energy rose 45%. But if you have solar panels and don't use gas, it barely affected you.
• Flight prices rise 20% in summer: this hits frequent travelers hard and doesn't affect those who don't travel at all.

Your personal inflation can be 2 points higher or lower than the official IPC depending on your lifestyle.

Core IPC vs. headline IPC: the important difference

The headline IPC includes all products, including energy and fresh food, which are highly volatile (they rise and fall sharply depending on the season and the markets).

Core IPC excludes energy and fresh food and measures the underlying price trend. It's the one the ECB tracks most closely for its interest-rate decisions, because it strips out the noise from the most volatile products.

When energy prices surge (as in 2022), the headline IPC can be at 8% while core inflation sits at 4%. When energy prices fall, the opposite can happen.

How the IPC affects your everyday life

1. Your salary loses value if it doesn't rise with inflation

If your salary rises 2% but the IPC rises 4%, in real terms you're earning 2% less. Your nominal salary has gone up, but you can buy less with it.

This is the main trap of inflation: the money looks the same (nominally), but its real value has fallen.

2. Salary increases tied to the IPC

Many collective bargaining agreements (convenios colectivos) include salary revision clauses linked to the IPC. If the agreement says "increase equal to projected IPC plus 0.5 points," and actual IPC turned out higher, a revision clause is often triggered to make up the difference.

If your company doesn't have an agreement with a revision clause, negotiating a raise at least equal to the IPC is what keeps your purchasing power intact. Below that, you're losing ground.

3. Your variable mortgage and the IPC

The Euríbor -which determines your variable mortgage payment- is set by the ECB based on inflation. When the IPC rises a lot (as in 2022), the ECB raises rates to curb inflation, and the Euríbor rises with it. Result: your mortgage payment goes up.

The relationship is direct: more inflation → higher interest rates → higher variable mortgage payments.

4. Your savings in a checking account erode

If you have €10,000 in a checking account earning 0% interest and inflation is at 3%, after one year those €10,000 have the purchasing power of €9,709. Over 10 years at 3% inflation, that capital is worth only €7,441 in real terms.

This is the real cost of not investing: inflation silently steals your purchasing power without it showing up in the nominal balance.

5. Pensions and benefits indexed to the IPC

Public pensions in Spain are revalued annually according to the IPC. If inflation is 4%, pensions rise 4% (under the current system). This protects pensioners' purchasing power, but it also represents a growing cost for public finances.

Historical IPC in Spain: the key moments

Inflation in Spain has gone through very different episodes:

• 2020: −0.3% (deflation due to covid, falling consumption and energy prices)
• 2021: 3.1% (start of the recovery and the first energy shocks)
• 2022: 8.4% - a 40-year historic high, driven by the war in Ukraine and energy prices
• 2023: 3.5% (back to more normal levels)
• 2024: 2.8%
• 2025: 2.7% (close to the ECB's 2% target)

In the first months of 2026 the trend reversed: the IPC has ticked back up to 3.2% (May 2026 figure), moving away from the 2% target again.

You can see the full historical series since 2000 in our historical IPC section.

How to calculate how much your savings have lost to inflation

If you want to know what the savings you had in 2010 are worth today in real terms, the inflation calculator will tell you precisely:

€10,000 from 2010 is equivalent to more than €13,500 in 2025 (using cumulative IPC, the latest full year published). Put another way: if you had €10,000 uninvested in 2010, today it's worth approximately €7,400 in real terms.

Try our inflation calculator to see what the money from any past year is worth today.

How to protect your purchasing power

Short term (necessary liquidity):

• Interest-bearing accounts or deposits offering at least the expected inflation rate
• Treasury bills (Letras del Tesoro) (in 2024–2025 they have paid 3%–3.5% annually, above inflation)
• Money market funds: invest in very short-term public and private debt, with near-daily liquidity and returns similar to official interest rates

Medium and long term:

• Index funds on equities: historically the stock market has beaten inflation by 5%–7% annually over the long run
• Real assets: property, although this requires more capital and offers reduced liquidity

What doesn't protect you:

• A non-interest-bearing checking account → guaranteed erosion from inflation
• Cash under the mattress → loses purchasing power at exactly the pace of the IPC

Inflation is silent but constant. Understanding the IPC is the first step to not letting it eat away at your wealth without you noticing.