Peru | Inflation surprised to the upside driven by food prices

Summary

Lima's CPI rose 0.69% m/m in February, well above consensus (0.23%). Annual inflation reached 2.2%, surpassing the target midpoint for the first time in over a year, driven by higher food prices, particularly poultry and vegetables, and a residential water tariff adjustment.

Key points

• Key points:
• Lima's CPI rose 0.69% m/m in February, tripling the Bloomberg consensus (0.23%). Annual inflation went from 1.7% to 2.2%, surpassing the BCRP's target midpoint for the first time in over a year
• Food prices rose 2.0% m/m, led by chicken (+8.5%), eggs (+18.0%), and vegetables, affected by climate anomalies and transport disruptions. Water tariffs rose 10.3% due to a SEDAPAL tariff rebalancing
• Core inflation (excluding food and energy) rose 0.36% m/m, pushing its annual rate from 2.0% to 2.2%. Risks are tilted to the upside due to climate effects and geopolitical tensions on oil prices
• We project year-end inflation at around 2.5%. We expect the BCRP to hold the policy rate at 4.25%, acting cautiously while monitoring the evolution of inflation expectations

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