In recent months, annualized inflation in metropolitan Lima has been registering declines and for November it reached 3.64%, after having registered a monthly rate of -0.16% in the penultimate month of the year.
In this context, the head of the Ministry of Economy and Finance (MEF), Alex Contrerasstated that by the end of the year inflation would be around 3.1% and 3.05%.
Thus, it would be very close to the target range of the Central Reserve Bank of Peru (BCRP), which is between 1% to 3%, a figure not reached since July 2021.
A week ago, Paul Castillo, manager of Monetary Operations and Financial Stability of the BCRP, pointed out that the chances of returning to a range of less than 3% could happen this year if the December rate is 0.2%.
Juan Carlos Odar, director of Phase Consultores, indicated that the scenario appears feasible to obtain the result expected by the entities because the supply shocks in food prices are being corrected downwards, and there is low demand.
However, he specified that this reduction also occurs because merchants, not being able to pass on the increase in their costs to their customers, assume part of the increase in costs.
“If December inflation is less than 0.18%, we will have a result within the target rangebut the reduction in prices is due to a very weak demand dynamic, to the fall in consumption,” he told La República.
Expectations 2024
Although it is expected to end 2023 in the target range, Odar warned that for the first two months of the year prices could temporarily rebound due to the El Niño phenomenon or different climatic anomalies.
For its part, the BCRP in its meeting this Thursday could continue to maintain the margin of decrease of 25 basis points or even cut the reference rate by up to 50. “The reduction in the rate will be conditional on the evolution of inflation,” Odar stressed.
Keys
Trend. The year-on-year inflation in Metropolitan Lima It closed November at 3.64%, reaching its most moderate variation in 29 months, according to the INEI.
BCRP. In November, it reduced its reference rate to 7.00% after the fall in inflation.
Expectations. The latest report from the BCRP indicates that business expectations (three months out) remain in pessimistic territory and below 50 points.
Source: Larepublica
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