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Tuesday, October 4, 2022

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BCRP: inflation began a downward trend

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During July, inflation in metropolitan Lima reached 8.74% —a figure that is taken into account to diagnose the country in economic matters—. This rate represented a slight drop compared to June, when it reached a peak of 8.81%.

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In this regard, Adrián Armas, central manager of Economic Studies of the Central Reserve Bank of Peru (BCRP), ratified what was announced a couple of months ago by Julio Velarde: that inflation will begin to recede from July.

“Inflation would return to the target range for the second half of next year. A downward trend in inflation is projected due to the moderation of the increase in international food and energy prices, as well as the reduction of (business) expectations of inflation”, he explained.

It is necessary to remember that, a few days ago, Velarde detailed that inflation would close at 6.4% this year; Y only for the third quarter of 2023 would it drop to 2.5%; that is, within the target range (between 1% and 3%).

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Only in mid-September, the issuing entity will present its new updated projections in its third Inflation Report of the year.

Still far from target range

However, Armas stressed that inflation will still remain at high levels in the face of the blows generated by the rise in fertilizer prices, despite the fact that the international costs of grains and fuels are also falling.

Precisely regarding fuels, Armas warned that in our market “a certain lag in the transfer of prices” persists, despite the gradual decline at a global level; even so, the prices of gasoholes will continue to fall during this month.

Economy would grow more without political crisis

Adrián Armas announced that the BCRP estimates a growth of 3.5% for economic activity during June, basically explained by the recovery of private consumption, since the monthly production of electricity grew 8.1% in July compared to the same month of 2019 ; while consumer credit, 16.9% in the same period.

“Unfortunately, the political situation is reflected in business confidence indicators and affects economic activity. There are still forces that are helping the recovery of private consumption (…). With the new normality, there is greater demand in the services sector, with rates of more than 40% in accommodation and restaurants”, he noted.

And it is that, despite the reduction in inflation expectations (see infographic), most indicators on the performance of the economy for this year remain in the pessimistic range.

Peru remains solid

Armas pointed out that, to date, there has been a tendency for the dollar to weaken with the reduction in inflation in the United States. “Our economy has strong foundations in monetary and fiscal policy,” he added, when asked if the turbulent political panorama could affect the expectations of the markets.

Along these lines, he stressed that Peru also has the lowest reference interest rate in the region (see infographic).

The word

Adrián Armas, Central Manager of Economic Studies of the BCRP

“Inflation would return to the target range for the second half of next year. A downward trend is projected due to the moderation of the increase in international prices.”

L-R infographic

Source: Larepublica

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