The year-on-year inflation in Metropolitan Lima It closed November at 3.64%, reaching its most moderate variation in 29 months – since June 2021 – according to the National Institute of Statistics and Informatics (INEI).
Only in November the Consumer Price Index (CPI) – by its technical name – fell 0.16% while in the accumulated since January it reached 2.82%.
The monthly result is explained by the decrease in prices in items such as food and non-alcoholic beverages (-1.19%), transportation (-0.50%) and communications (-0.06%).
Although in year-on-year terms only accommodation, water and electricity entered negative territory, over the last few months there has been a sharp drop in food inflation – which in August reached 11.02% and doubled general inflation – and This sheds light on the anticipated return to the target range set by the Central Reserve Bank of Peru (BCRP): between 1.0% and 3.0%.
Juan Carlos Odar, director of Phase Consultores, maintains that inflation would regularize again if the December figure turns out to be 0.18% or less, anticipating what the market expected.
Recently, the president of the BCRP, Julio Velarde, recognized that inflation would end the current between 3.4% and 3.5%. With the new data from the INEI, it is most likely that in its next Inflation Report the issuing entity will revise its estimate downwards.
“It is not good news because it means that prices are falling, but real incomes have not recovered. Not even the BCRP expected it,” Odar commented for La República.
In the opinion of the academic, the fall in inflation in a context of “cooling of the economy” is not desirable, and this is where the BCRP has to cautiously reduce the interest rate —currently at 7.0%— so that the market does not interpret an “aggressive decline.”
Furthermore, due to the El Niño phenomenon, it is most likely that inflation will go through a new upward period due to the interruption of sowing and harvesting, as well as the interruption of roads due to climatic anomalies. Odar recalls that these falls in inflation and reference rates “take a long time” to be felt in homes.
BBVA Research predicts that the 3.5% inflation rate has a downward biasand they assure that the high base of interannual comparison and the weakness of the economy “do not allow us to rule out that inflation ends in 2023 just above the target range.”
They recommend that the BCRP continue reducing its reference interest rate in the short term and, why not, a cut greater than 25 basis points given the current environment of the prices and activity.
Trujillo and Arequipa the most affected
According to the INEI report, interannual inflation in Arequipa and Trujillo is 5.08%, approaching double that seen in metropolitan Lima. On the other side of the coin are Pucallpa and Iquitos, with 1.82% and 0.88%, respectively.
Focusing on inflation without food and energy, the rate is close to 3.0%. During November there was no change.
The Central Reserve Bank of Peru estimates that At the end of the year this indicator will be within the target range (between 1% and 3%).
The word
Juan Carlos Odar, director Phase Consultores
“The inflationary risk comes from supply, not demand, so if El Niño were not in sight, there probably would have already been greater cuts (to the reference interest rate).”
Source: Larepublica
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