The CPI posted a monthly rate of 0.79% in December (from 0.78% a year ago), above market consensus of 0.63% (as per Bloomberg) and our forecast of 0.45%. The bulk of the upside pressure came mainly from food prices (incidence of 42 bp) due to a lower production of fruits and vegetables. Restaurants & hotels CPI (incidence of 12 bp) and transportation (11 bp) CPI also exerted relevant pressure, with the latter associated to a seasonal increase in air and bus tariffs due to the holidays. On an annual basis, headline inflation stood practically unchanged at 8.45% in December (compared to the previous month), while core inflation (excluding energy and food items) fell to 5.58% (from 5.71%).
At the margin, headline inflation rebounded in December. The seasonally adjusted three-month annualized variation of the CPI came in at 7.06% in December (from 6.41% in November), while core inflation (excluding food and energy items) fell to 4.97% (from 5.18%).
We expect inflation to slow down to 3.7% by the end of this year, aided by lower commodity prices and an economic slowdown. We do not discard additional rate hikes given still high inflation (our end of year policy rate forecast is at 7.50%).