Peru | Prices continue to rise rapidly

The Consumer Price Index of the city of Lima (CPI) increased in August by 0.98% MoM. The pass-through of the higher exchange rate to prices and the high international prices of imported inputs such as food and fuels continue to explain much of the rapid increase in prices.

Key points

• Key points:
• Inflation in year-on-year terms increased again, from 3.8% in July to 5.0% in August. It should be added that inflation that excludes food and energy, a more trend measure of the rate at which prices are increasing, increased from 2.1% in July to 2.4% in August.
• It is also important to note that the depreciation of the local currency (15% year-on-year) and its subsequent pass-through to prices would be having a significant impact on the acceleration of inflation.
• With the upward trend in inflation, inflationary expectations have also adjusted in the same way. These are likely to continue to climb.
• In our baseline forecast scenario, we anticipate inflation to be between 4.0% and 4.5% by the end of this year. However, this variable has been surprising to the upside, particularly in the last two months, and its tendency to increase has been sustained. Thus, it is likely that inflationary expectations will continue to climb as well.

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