Itaú BBA - PERU – May’s inflation accelerated, but core inflation was well-behaved

Macro Latam

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PERU – May’s inflation accelerated, but core inflation was well-behaved

junio 3, 2019

CPI was pressured mainly by non-core items

CPI was pressured mainly by non-core items. May’s CPI posted a month-over-month rate of 0.15% (from 0.02% a year ago). The CPI figure was pressured mainly by an increase in prices of pay TV services; an increase of chicken prices and higher energy prices.

On an annual basis, headline inflation increased in May, while core inflation fell slightly. Annual headline inflation climbed to 2.73% in May (from 2.59% in April). According to the breakdown, core inflation (excluding energy and food items) fell slightly to 2.56% (from 2.59%). In turn, food and beverage prices accelerated to 2.74% year-over-year in May (from 2.64%). The indicator that tracks the percentage of items with annual inflation above the 2% target increased to 37.7% in May (from 34.0% in April). However, the diffusion index continues to show pretty low inflation across a broad range of goods and services. 

At the margin, headline inflation also increased, while core inflation remained stable. The seasonally-adjusted, three-month annualized variation of the CPI was 3.89% in May (from 2.77% in April), while core inflation (excluding food and energy) stood practically unchanged in May (compared to April) at 2.94%.

We forecast annual headline inflation of 2.6% by the end of 2019. Although headline inflation accelerated in May, core inflation seems to be well behaved, giving room to the central bank to keep the policy rate unchanged.


Julio Ruiz

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