Peru | Prices fall again in October, surprising the market

Summary

The consumer price index decreased 0.09% m/m in October. The result for the month is mainly explained by the decrease in the prices of some foods (normalization of supply). With this result, the interannual inflation rate stood at 2.0% in October, in the center of the BCRP's target range.

Key points

• Key points:
• The component of the consumer basket that excludes food and energy, a more trend measure of the pace at which prices advance, increased 0.08% m/m in October. Thus, in year-on-year terms, this inflation indicator stood at 2.5%.
• At BBVA Research we estimate that inflation will register a certain increase in the remainder of the fourth quarter due to an unfavorable year-on-year comparison base. Our current projection of 2.5% for the end of 2024 has, however, a downward bias (the prices of some foods still have some room to continue normalizing after the supply shocks of previous months have dissipated).
• This projection for total inflation, together with (i) an underlying one that is back in the target range and with a tendency to decrease in recent months, (ii) anchored inflationary expectations, (iii) an economy that is still below its potential level, recovering, but without generating demand pressures on prices, and (iv) relatively normal weather forecasts for the following months, suggests that the BCRP will soon resume the cycle of cuts in its monetary policy rate.

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