BCRP: food prices are moderating after two years of rebound

Although there is no crystal ball to predict events, the Central Reserve Bank of Peru (BCRP) expect an auspicious summer in inflationary terms considering that in recent months there has been a constant decline.

In November, the Consumer’s price index (IPC)—technically named after the variable that studies market prices—fell to 3.6% and brings us closer, after the roar of the pandemic, to the target range of 1% to 3%, which motivated the issuing entity to reduce the reference interest rate to 6.75% in order to stop squeezing consumption.

“There are good news. Let us remember that one of the factors that has contributed to the lower growth in private consumption this year has been the high growth in food prices, which has been going on since last year. Fortunately, this trend has moderated,” Adrián Armas, central manager of Economic Studies at the BCRP, told the press.

Armas recalled that food and beverage inflation in Peru is at 5.60%, its lowest level since July 2021, and although “it is still high” the outlook is better than at the beginning of 2023, when it hit a peak close to 15%. Households, especially the most vulnerable, felt the impact as the costs of essential products such as chicken, eggs and lemon rose.

Now with the continuous reduction of price indices, Armas points out that this helps to regain consumer confidence and opens up space for them to make other expenses by reducing the budget allocated for the purchase of food.

Total inflation in the target range this 2023?

The BCRP official acknowledged that it is possible to converge to the target range this month, but it is most likely that we will arrive at the beginning of 2024, although it will also depend on the aggressiveness of the phenomenon of The boy.

Next week they will present the latest inflation report and there they will give more details about the products that could be affected by the climate anomaly.

It should be added that the Ministry of Economy and Finance (MEF) shares the reading of the BCRP. In the words of Minister Alex Contreras, inflation would peak today between 3.1% and 3.05%, which is “a notable reduction” considering that when he entered the Government, the CPI was around 9% — the highest in 26 years. years-.

Impact of continued rate cuts

A couple of days ago, The BCRP lowered the reference rate for interbank operations to 6.75% —a value not seen since September 2022—, and to date it has had more influence on short-term products where there are lower credit risk components, according to Adrián Armas: corporate and deposit interest rates, mainly.