CPI rose by 0.02% mom in September (from 0.52% a year ago), below our 0.26% forecast and market consensus of 0.25% (as per Bloomberg). Most of the downside pressure came from the food and nonalcoholic beverages index (contribution of -17-bp) which mitigated upside pressure from restaurants & hotels (contribution of 7-bp) and transportation (contribution of 7-bps) indexes. The latter index reflects higher fuel prices, consistent with international commodity prices. On an annual basis, headline inflation fell to 5.04% in September (from 5.58% in August), while core inflation (excluding energy and food items) stood at a low 3.60% (from 3.81%).
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 1.75% in September (from 1.44% in August), while core inflation (excluding food and energy items) stood at 2.84% (from 2.44%).
Today’s benign inflation figure is consistent with the central bank continuing to cut its policy rate by 25-bp in its October meeting (reaching a level of 7.25%), in our view. Our inflation forecast stands at 3.8% end of this year.