Inflation falls in June to year-and-a-half lows

After reaching peaks of 1.25% in the first quarter of 2023, leveraged by a social conflict that was fueled by natural disastersthe inflation in Metropolitan Lima it returned to negative territory and weighed down 0.15% in June, a drop of 6.46% in its twelve-month performance from 7.89% in May.

This is the lowest annualized inflation in a year and a half, and the lowest monthly variation in 36 months, according to the Central Reserve Bank of Peru (BCRP). Previously, the advance of the Consumer Price Index (CPI) was 0.56% and 0.32% in the periods of April and May, respectively. Thus, the cumulative advance in 2023 is 2.52%.

In the sixth month of the year, inflation was anchored by the fall in food prices, which fell 1.20%, and recorded a negative contribution of -0.30%, which was “determinant” in the global. Lags were also seen in the Transportation (-0.28%), Accommodation, Water, Electricity, Gas and Other Fuels (-0.13%) sectors, and to a lesser extent in the Communications division (-0.02% ).

Chicken goes down, fish goes up

In June the chicken went down. The Food and Non-Alcoholic Beverages division had the highest negative variation thanks, in large part, to the fall in meat prices (-7.4%), highlighting eviscerated chicken (-16.5%) and its cuts of wings (-12.7%), breast (-9%) and leg (-9%), not counting the giblets (-6.7%). The Ministry of Economy and Finance (MEF) had already anticipated it.

“This, due to the normalization of factors that affected prices in May: supply of corn and soybeans, vaccination of birds against avian flu, among others,” he said. INEI.

Likewise, declines in cilantro (-34%), celery (-18%), beetroot (-15.48%), corn (-14.63%), chili pepper (-11.61%) and lettuce were reported. (-11.60%), in addition to other meat products such as Milanese (-7.6%) and gutted hen (-1.2%).

In front, the foods that rose the most were onion (45.19%), tuna (27.93%), mango (23.83%), Chinese onion (18.17%), spinach (17 97%), white grapes (17.54%), horse mackerel (13.75%) and mackerel (11.59%). Three of them, marine products that multiplied their value in the face of abnormal waves.

And the credits go down?

The economists Juan Carlos Odar and Elmer Cuba agree that the decline in inflation in June could anticipate a relaxation of the BCRP’s monetary policies in the third quarter of the year, specifically around September.

For Odar, a specialist at Phase Consultores, a reduction in the reference rate – the percentage with which banks continue to place credits in the market – would not be in the short term, since there are still factors to consider such as a resurgence of conflict.

In May, the entity run by Julio Velarde decided to keep its interest rates at 7.75% for the fifth consecutive month. “It is possible that in the Monetary Program of July 13 a rise in the rate is not mentioned if necessary. If inflation continues to drop in July, the economy cools and the exchange rate falls, we could talk about a rate drop soon,” Odar said. For its part, Cuba mentions that business expectations must be waited to overcome two strong anchors of the economy: the price of Petroleum and exchange rate.

“If the trend continues, it would not be pertinent for the Bank to continue offering such high rates. And that, because in 20 years we have never been outside the target range for so long”, explains the former director of the BCRP.

Inflation begins to de-escalate

The annual trend of inflation decreases in a sustained manner: January (8.66%), February (8.65%), March (8.40%), April (7.97%) and May (7.89%) . In June, the National Consumer Price Index decreased by -0.16%, mainly explained by the behavior of the Food and Non-Alcoholic Beverages consumer divisions (-1.11%).

Consumer prices presented negative variations in twenty-two of the twenty-six cities where it is calculated CPI. The lowest variations occurred in Piura (-0.88%), Pucallpa (-0.75%), Chimbote (-0.60%) and Ica (-0.51%).

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Amen. The bread also went down. The price of this traditional food and cereals in general fell -1.35% in June.

Ceiling. The rentals of housing also weighed down. In the sixth month of the year, they fell -0.14%, although they maintain a progress of 1.24% in the annualized picture.