CPI surprised to the upside in March affected, in part, by harsh weather conditions. CPI increased 1.25% mom in March (from 1.48% a year ago), above our forecast of 1.07% and market consensus of 0.9% (as per Bloomberg). The main upward pressure came from food prices (contribution of 67-bp to headline CPI), driven by some fruits and vegetables prices affected by excess rains in the month and chicken prices. Education CPI contributed with 40-bp, associated to a seasonal adjustment to tuitions. On an annual basis, headline inflation stood at 8.40% in March (from 8.65% in February), aided by a favorable base effect, while core inflation (excluding energy and food items) increased to 5.92% (from 5.87%).
At the margin, headline and core inflation fell only slightly in March. The seasonally adjusted three-month annualized variation of the CPI came in at 6.79% in March (from 6.83% in February), while core inflation (excluding food and energy items) stood at 4.43% (from 4.48%).
We expect inflation at 4.0% end of this year. Lower commodity prices and below potential activity are likely to help inflation to slow down in 2023. In this context, we expect the BCRP policy rate to remain unchanged throughout the year at 7.75%.
Julio Ruiz