Published on Thursday, June 1, 2023 | Updated on Friday, June 2, 2023

Peru | High base of comparison begins to gain importance in reducing inflation

Inflation increased 0.32% MoM in May. This was due to the rise in the prices of some foods and restaurants, moderated by the fall in electricity tariffs and fuel prices and the normalisation of transportation costs.

Key points

  • Key points:
  • The year-on-year inflation rate decreased to 7.89% in May (April: 7.97%).
  • Core inflation registered a level of 5.11% in year-on-year terms, a significant reduction (April: 5.65%) mainly due to a high YoY comparison base. Despite this, it remains above the Central Bank's target range.
  • At BBVA Research, we estimate that the high YoY basis for comparison will probably also lead to a significant drop in inflation in June, both total and core. This effect will continue to have a downward impact in the coming months and to this will be added the year-on-year decline in commodity prices, the impact of the restrictive monetary position, and the weakness of domestic demand that we foresee in our macroeconomic scenario. We expect YoY inflation at a level close to 4% by the end of this year.
  • We maintain our forecast that, despite the weakness of domestic demand and the restrictive monetary position, the Central Bank will not begin to lower its policy rate (currently at 7.75%) until the fourth quarter.

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