CPI fell by 0.32% mom in October (from 0.35% a year ago), below our 0.00% forecast and market consensus of 0.19% (as per Bloomberg). Downside pressure came mainly from food and nonalcoholic beverages index (contribution of -50 bps). Core inflation (excluding energy and food items) was also well behaved, growing 0.22% mom (from 0.50% a year ago). On an annual basis, headline inflation fell to 4.34% in October (from 5.04% in September), while core inflation stood at a low 3.32% (from 3.61%).
At the margin, headline and core inflation remained inside the central bank's target range of 2+/-1%. The seasonally adjusted three-month annualized variation of the CPI came in at 0.98% in October (from 1.72% in September), while core inflation stood at 2.60% (from 2.93%).
Our inflation forecast for end of this year stands at 3.8%. Lower inflation amid weak activity is consistent with the central bank (BCRP) cutting further its policy rate at the same pace (25 bps) in each of the last two meetings of the year, reaching a level of 6.75%.