2026/06/02 | Diego Ciongo & Soledad Castagna
CPI rose 0.1% MoM in May, coming in well below both our forecast (0.8%) and market expectations (0.6%). The monthly print was mainly driven by increases in selected food items (0.1% MoM)—notably meat (+1.2% MoM)—alongside fuel (+0.9% MoM) and several service categories. These upward pressures were largely offset by declines in imported durable goods, given stronger PYG. In fact, the PYG appreciated 7% year-to-date and 23% year-over-year against the USD.
Core inflation dynamics showed a marked slowdown. CPI X1 (excluding fruits and vegetables, regulated services, and fuels) increased just 0.1% MoM, a significant deceleration from 0.6% MoM in May 2025, reinforcing the view of moderating underlying inflationary pressures.
On an annual basis, headline inflation rose to 2.4% YoY in May, up from 2.3% in April, reflecting the fuel shock, while core X1 inflation eased to 1.2% YoY, down from 1.7% the previous month. Headline remains comfortably within the tolerance range of the BCP’s inflation target (3.5% ±2%), while the core is located below the lower bound of the target’s tolerance range. Consistently, the core ex food and energy inflation (CPISAE) fell to 1.1%, from 1.5%, also below the lower bound of the target’s tolerance range.
Momentum indicators remain mixed at the margin. On a seasonally adjusted basis, three‑month annualized headline inflation jumped to 4.6% (from 3.3% in April), fully reflecting the fuel-driven shock, while core inflation momentum remains stable at 0.1%, (same figure than in April), highlighting the absence of generalized price pressures.
Our heat map shows that 83% of CPI items are currently running below the central bank’s 3.5% target, up from 75% in the previous month and 50% in May 2025, underscoring the increasingly broad-based nature of the disinflation process.
Our take: Our YE26 inflation forecast stands at 4.0%. We continue to expect the policy rate to stay on hold at 5.5% throughout 2026 amid benign core inflation figures. The June CPI print will be released on July 2.