CPI in May remained flat from April (0.0% MoM), slightly below our forecast (0.10%) and well below the market consensus (0.4%), according to the BCP survey. Food prices fell by 0.1% MoM in May due to a decline in fruits and vegetables (-7.8% MoM), partially offset by higher meat prices (5.0% MoM). Meanwhile, fuel prices fell by 2.9% MoM, driven by downward adjustments in gasoline. The Core CPI X1 (which excludes fruits and vegetables, regulated service prices and fuel) increased by 0.6%, up from 0.2% a year ago. On an annual basis, headline inflation fell to 3.6% in May (down from 4.0% in April), while the Core X1 CPI stood at 5.9% (from 5.5% in the previous month). We note that headline inflation remains within the tolerance band of the BCP’s inflation target (3.5% +/- 2%), while core X1 is above the upper limit of the target range.
At the margin, headline inflation decelerated, while core inflation accelerated in May. Using our own seasonally adjusted figures, the three-month annualized headline inflation reading fell to 5.0% in May (from 5.5% in April), while core inflation rose to 7.1% (from 6.3% in the previous month).
Our heat map shows that 50% of the items are below the central bank's inflation target of 3.5%, remaining stable since March 2025, but lower than the end-2024 data (58%)
Our take: Our inflation forecast stands at 4.0% for YE25. Low commodity prices, in particular oil, should contribute to the inflation convergence. The next monthly monetary policy meeting will be held on June 24, while the CPI for June will see the light on July 2.