Peru | October inflation: high again and higher than anticipated

Summary

The Consumer Price Index for the city of Lima registered a variation of 0.58% m / m in October (Bloomberg consensus: + 0.21%). The October result is mainly explained by the increase in the price of fuels, electricity rates and the price of foodstuffs.

Key points

• Key points:
• In year-on-year terms, inflation accelerated from 5.2% in September to 5.8% in October (in December 2020: 2.0%)
• Inflation that excludes food and energy, a more trend measure of price variations, has also maintained an upward trend, going from 2.6% in September to 2.8% in October
• Some elements suggest that inflation could remain at relatively high levels due to the de-anchoring of inflation expectations that can generate certain inflationary inertia and “second round” effects on prices.
• Another element is that companies are losing margins that, eventually, they will try to recover. The prices faced by the wholesaler are not being fully passed on to the final buyer.
• More persistent inflationary pressures and the relative de-anchoring of inflation expectations have led the BCRP to adjust monetary conditions more actively than expected a few months ago, and to increase reserve requirements in soles. Given that inflation shows no signs of abating, we anticipate a further adjustment of the benchmark rate at the November meeting.

Geographies

Topics

Tags