CPI increased 0.39% mom in July (from 0.94% a year ago), below our forecast of 0.55% and market consensus of 0.41% (as per Bloomberg). Upside pressure came mainly from food (contribution of 18-bp) and restaurants & hotels (contribution of 10-bp) subindexes. On an annual basis, headline inflation fell to 5.88% in July (from 6.46% in June), while core inflation (excluding energy and food items) stood at 3.89% (from 4.35%).
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 1.78% in July (from 3.97% in June), while core inflation (excluding food and energy items) stood at 1.94% (from 1.81%).
Our yearend 2023 inflation forecast of 4.0% has a downside bias after today’s CPI release. A faster disinflation process, amid weak activity, increases the odds of the central bank cutting rates sooner than our base call of October. We expect the central bank to cut its policy rate by 25-bp in each of the last three meetings of the year, reaching a level of 7.00%.