Itaú BBA - PERU – Inflation surprises to the upside in November, but remained low

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PERU – Inflation surprises to the upside in November, but remained low

Dezembro 2, 2019

Headline and core annual inflation remained practically unchanged

CPI was above market expectations in November. CPI posted a month-over-month rate of 0.11% (from 0.12% a year ago), above our forecast of 0.06% and market expectations of 0.02% (as per Bloomberg). The monthly figure was pressured mainly by household living costs, which increased 0.94% month-over-month, associated to an upside update of residential electricity tariffs.  

On an annual basis, headline and core inflation remained practically unchanged. Annual headline inflation stood at 1.87% in November (from 1.88% in October), the third month in a row below the central bank’s target. Core inflation (excluding energy and food items) stood at 2.34% in November (from 2.31% in October). The indicator that tracks the percentage of items with annual inflation above the 2% target stood at 24.5% in November (from 26.4% October). The diffusion index shows low inflation across a broad range of goods and services.

At the margin, headline inflation accelerated, while core inflation slowed down. The seasonally-adjusted three-month annualized variation of the CPI was 2.06% in November (from 1.47% in October), while core inflation (excluding food and energy) stood at 2.57% (from 2.62%).

We now expect inflation at 1.9% by the end of 2019. We expect the widening of the output gap to curb inflationary pressures.

Julio Ruiz

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