2026/06/03 | Diego Ciongo & Soledad Castagna
Inflation rose by 0.70% MoM in May (from +0.11% a year ago and a 5-year median of 0.28%), in slightly above our call and the BCU’s survey median, both at 0.6% MoM. The main upward contribution came from Transport, which rose 2.87% MoM (+0.31 p.p. incidence), driven by an increase in domestic oil prices. Food and non- alcoholic beverages prices also increased (+0.56% MoM; +0.15 p.p. incidence), as did Housing, water, electricity, gas and other fuels (+0.73% MoM; +0.10 p.p. incidence). On the downside, fruits prices fell 4.19% MoM and alcoholic beverages (-0.17% MoM), partially offsetting the headline increase.
Core inflation remained below headline CPI, although it accelerated in year-over-year terms. However, all CPI measures remain within the BCU’s of the 4.5% target’s +/-1.5% tolerance range. Headline inflation rose to 3.77% YoY in May, up from 3.16% in April. Moreover, Core inflation increased by 3.86% YoY (from 3.74% in the previous month), while CPI‑CE VFCTA rose by 3.61% YoY, up from 3.45% in April. **For more details and measures see the table below.
At the margin, all inflation measures accelerate in May. Based on our seasonally adjusted estimates, three‑month annualized headline inflation increased to 5.8% in May, up from 3.7% in April. Moreover, core inflation accelerates to 4.8%, from 4.3% previously. Meanwhile, the CPI‑CE VFCTA rose to 5.8%, from 4.9% in the prior month.
Our CPI heatmap shows that 62% of selected items are below the central bank’s target (4.5%), same as the previous month (62%), but above the May 2025 figures (38%).
Our Take: Our YE26 inflation forecast stands at 4.9%, driven by the impact of higher oil prices on the CPI. June´s CPI will be released on July 3. On the monetary front, we expect the policy rate to remain unchanged at 5.75% through 2026, as the Central Bank balances inflation risks against still‑moderate domestic activity. Nonetheless, a rate hike cannot be ruled out, contingent on the extent of oil price pass‑through to headline inflation and, more importantly, to inflation expectations.