Peru | Year-on-year inflation slows down in March, although less than expected

Summary

The consumer price index increased 1.1% MoM in March. The result for the month is explained by seasonal and supply factors. The year-on-year rate was 3.0% (3.3% in February) at the upper limit of the Central Bank's target range.

Key points

• Key points:
• In March, price increases that stood out were due to (i) seasonal factors, among them the increase in educational pensions, transportation rates (Easter Week), and fish prices (greater demand during Easter); and (ii) supply issues, which explained the lower availability of poultry products.
• The component of the consumer basket that excludes food and energy, a trend measure of the pace at which prices advance, increased 0.88% MoM in March and 3.1% in year-on-year terms.
• We estimate that in the following months inflation will resume its downward trend because (i) the weather anomalies are dissipating, (ii) the year-on-year comparison base is high in Q2 and Q3, (iii) the economy exhibits slack, and (iv) inflation expectations are compatible with the Central Bank's target range. However, the base effect will partially reverse in the fourth quarter and together with the lagged impacts of the global El Niño (on agricultural production in the southern regions of the country) will lead to inflation closing the year slightly above 2.5%.

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