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Easing cycle to continue.
2024/02/01 | Julio Ruiz

CPI rose by 0.02% MoM in January (from 0.23% a year ago), above our -0.15% forecast, but below market consensus of 0.13% (as per Bloomberg). Upside pressure from restaurants & hotels (contribution of 4 bp) was mitigated by lower transportation (-7 bp) and food & non-alcoholic beverages (-1 bp). Lower transportation inflation was explained mainly by a fall in fuel prices. Core inflation (excluding energy and food items) was also well behaved in January, rising by 0.01% MoM (from 0.05% a year ago). On an annual basis, headline inflation fell to 3.02% in January (from 3.24% in December), almost touching the upper bound of the central bank target of 2%+/-1%, while core inflation stood at a low 2.86% (from 2.90%).


At the margin, headline and core inflation were also well-behaved. The seasonally adjusted three-month annualized CPI came in at 2.15% in January (from 0.17% in December), while core inflation stood at 2.56% (from 2.37%). 



Well behaved inflation (our end of year estimate is 2.8%) and still soft non-primary activity support the central bank easing cycle. We expect the central bank to continue easing monetary policy (with 25-bp rate cuts) in 1H24, from the current 6.50% down to 5% by July 2024, and staying at that level through year-end.