CPI posted a bi-weekly rate of 0.29% in the first half of July (from 0.43% a year ago and compared with a five-year median of 0.36%), essentially in line with our 0.30% forecast and slightly above market consensus of 0.26% (as per Bloomberg). Core inflation was also in line with expectations, with a bi-weekly rate of 0.24% (from 0.34% a year ago and compared with a five-year median of 0.25%) relative to our forecast and market consensus both at 0.22%. Within core CPI, we note core goods food stood at 0.21% (relative to the 5-year median of 0.35%), while services stood at 0.32%, relative to the 5-year median of 0.22%. As expected, lower gas prices exerted downward pressure to the non-core CPI.
On an annual basis, headline and core inflation fell to 4.79% in 1H July (from 4.93% in 2H June) and 6.76% (from 6.86%), respectively. Looking at the core CPI breakdown, food (10.02%, from 10.32%) and non-food (5.64%, from 5.75%) goods inflation fell further, while services inflation stood at 5.29% (from 5.27%)
We expect inflation to end the year at 4.5%, driven by a strong currency and lower commodity prices.