Peru | Year-on-year inflation keeps falling

Summary

Inflation printed at 0.39% m/m in July. The advance of the CPI is mainly explained by the rise in the prices of some foods (vegetables, poultry, restaurants) and the greater tourist demand associated with the celebrations of National Holidays.

Key points

• Key points:
• The year-on-year inflation rate decreased to 5.88% in July (June: 6.46%), favored by a high base of comparison (July 2022 inflation was 0.94% m/m).
• Core inflation registered a level of 3.89% year-on-year, the lowest since January 2022, also favored by a high base of comparison. Despite this, it is still above the target range of the Central Bank.
• At BBVA Research, we maintain our forecast that headline inflation will continue to decline in the coming months due to the high year-on-year base of comparison, the year-on-year decline in commodity prices, and the weakness shown by domestic demand. However, the speed of this decline could be compromised by the impact that the El Niño Phenomenon has on agriculture, fishing, and transportation to supply markets.
• We anticipate that by the end of the year inflation will be around 4%. In this context, we believe that the Central Bank (BCRP) will maintain the monetary pause for two more months before starting a cycle of interest rate normalization in October despite the weak progress in activity and the restrictiveness of the monetary position.

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