2025/11/03 | Andrés Pérez M., Vittorio Peretti, Andrea Tellechea & Ignacio Martínez
Consumer prices fell by 0.1% from September to October, coming in below both the Bloomberg consensus and our forecast, marking the third consecutive downside surprise. The report showed well-contained inflation, with all twelve CPI categories recording increases below 0.22%. The downside surprise was driven by non-core items. Higher prices in transport and restaurants & hotels were offset by lower non-core prices, particularly in food and domestic energy. Core inflation, which excludes volatile food and energy components, rose by 0.04% month-over-month.
Sequential price pressures remain low. Headline inflation on an annual basis declined by 1 basis point to 1.35%, staying below the midpoint of the central bank’s target range of 2% ± 1.0% since November 2024. Sequentially, headline inflation was only -0.1% QoQ/SAAR. Core inflation fell slightly to 1.8% year-over-year, close to three-year lows, and sequentially sits at a similar rate of 1.8% QoQ/SAAR. Importantly, survey-based one-year inflation expectations have remained anchored within the target range since December 2023, reaching 2.2% in October.
Our take: We expect headline inflation to rise moderately in the coming months, partly due to base effects, reaching 1.8% by year-end. The balance of risks remains tilted to the downside, particularly if favorable exchange rate dynamics and low oil prices persist. Given the benign inflation outlook, we anticipate an additional 25-bp rate cut this year, bringing the policy rate to 4%. With the output gap largely closed and the policy stance only slightly restrictive, there is limited urgency to continue easing at next week’s meeting. The November inflation print will be released on December 1, and we preliminarily forecast a 0.1% month-over-month increase.
