Peru | Inflation fell strongly in April and returned to the target range

Summary

The consumer price index contracted 0.05% MoM in April. The result for the month is explained by supply and seasonal factors. The year-on-year rate was 2.4% (3.0% in March) within the Central Bank's target range.

Key points

• Key points:
• In April, prices fell due to (i) supply issues, thanks to the greater availability of poultry (chicken) and marine (horse mackerel) products and, (ii) seasonal factors, including price correction of inter-region transportation after Holy Week (which took place in March).
• The component of the consumer basket that excludes food and energy, a more trend measure of the pace at which prices advance, increased 0.11% m/m in April and 3.0% in year-on-year terms (at upper limit of the Central Bank's target range).
• We estimate that inflation will maintain a decreasing trend in the second and third quarters of the year in an environment where: (i) inflation expectations are already within the target range, and (ii) the economy is recovering, but without demand pressures on prices. However, the base effect that has been contributing to the reduction in year-on-year inflation will reverse slightly in the fourth quarter and, together with the lagged effect of the climate anomaly on the supply of some foods produced in the south of the country, will lead to inflation printing around 2.6% at the end of the year.

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