Peru | Prices decrease in September, surprising the market

September inflation decreased by 0.24% m/m. The result is explained by the decrease in the prices of some foods. The interannual rate was 1.8%.

Key points

Key points:
Inflation excluding food and energy, a more trendy measure of the pace at which prices are rising in general, has been an important factor in monetary policy decisions. In September this index showed no inter-month variation, so that in inter-annual terms it advanced 2.6%.
At BBVA Research we predict that inflation will register a certain increase in the fourth quarter due to an unfavorable year-on-year comparison base, but that it will still end the year around 2.5%, within the BCRP's target range.
This scenario, together with underlying inflation that is back in the target range and with a certain tendency to decrease in recent months, anchored inflationary expectations, a recovery in activity that is still incipient, and a monetary position that is still contractionary, They suggest that the BCRP will continue to cut its policy rate for the remainder of the year if the conditions in the exchange market provide the space to do so.
In our base scenario we consider that the reference interest rate, currently at 5.25%, will end the year at 4.50%, a level that we estimate as neutral and at which the policy rate would remain throughout 2025.