Peru | Inflation decreases in February, despite the impact of weather factors

Summary

The consumer price index increased 0.19% m/m in February affected by adverse weather conditions (they negatively impacted the normal supply of some foods) and the greater demand for transportation due to carnivals. On the contrary, the decrease in electricity rates attenuated the advance of the CPI.

Key points

• Key points:
• The interannual inflation rate now stood at 1.5%, below the center of the Central Bank's target range (2%, +/- one percentage point). It is the lowest rate since September 2018.
• The price level of the component of the consumer basket that excludes food and energy, a more trendy measure of the pace at which prices advance in general, increased 0.19% m/m in February. In year-on-year terms it thus stands at 2.1% (2.4% in January), a significant decrease that is largely due to a high comparison base.
• Taking into account the high year-on-year comparison base, inflation could decrease even more in the short term and reach between 1.0% and 1.5%. The risk is that the warming of the sea off the Peruvian coast will prevent this scenario from coming to fruition. Going forward, assuming that these weather anomalies are transitory and considering that inflation expectations are anchored, that activity will grow in the coming quarters somewhat above its potential rate, and that the base of interannual comparison is low, we predict that inflation will tend to rise in the last months of the year, closing 2025 at around 2.5%, comfortably within the Central Bank's target range.

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