Inflation, a global problem

Patricio Quintanilla Paulet

Rector U La Salle

We have closed the year 2021, with an inflation rate of 6.43% in 12 months, which has generated alarm in the population and is presumed to be a particular problem in Peru, but it is not.

Global Inflation

In the year 2021, there has been a increase in international prices of products that Peru imports, and as a reference I indicate the increase between December 2020 and 2021. Oil, which has a consequence in the price of gasoline and LPG, increased 58.7%; wheat, the main input for bread and pasta, varied by 27.4%; corn, a component of chicken feed, was 22.2% and soybean oil, used in edible fats, went from USD 977.00 to USD 1434.00 per MT, which is equivalent to 46.7%.

In the main countries of the region, inflation has been higher than that of Peru, Brazil (10.7%), Mexico (7.4%), Chile (7.2%), the United States (6.8%), among others.

All these products are imported, so it influences the price of the dollar of the United States, which increased by 10.2%, going from S / 3.66 at the beginning of 2021 to S / 3.99 at the end of the year.

National inflation

For the reason mentioned above, the prices that increased the most were Food and Beverages (oils, chicken and others). Another item was Housing Rental, Fuels and Electricity, for the increase in LPG and Natural Gas, liquid fuels, with the consequent impact on freight rates, additionally electricity rates vary.

The role of the BCR

Traditionally, the Central Reserve Bank of Peru (BCR) publishes the so-called monetary program on the second Thursday of each month, but this time it has done so on Friday the 7th of this month, in an unusual way.

One of the instruments most used by the authorities is the so-called “Reference interest rate”, which as its name implies, is an indication for interbank operations, but which has an influence on the market rate, which banks charge their credit customers.

A higher rate reduces inflationary pressures, which is why the BCR has been increasing it in recent months. Last Friday the 7th, it varied from 2.5% to 3.0% and this policy is likely to continue.

The inflation target range of the Issuing Institute is between 1.0% and 3.0%, which we have obviously exceeded. A few months ago, the BCR estimated to reach this range in the second quarter of the year, but recently it estimates that it will be reached in the last quarter of the year.

conclusion

The increase in prices of the main products affects the economy of families, but we are in a complex situation that has combined international prices, the rise in the exchange rate and the pandemic.

Hopefully it will fade in the coming months.