October inflation data in Latin America give no truce

Annual inflation in Paraguay and Peru soared in October to levels not seen in at least a decade, while rising energy and food prices pose a challenge to central banks.

Inflation of Paraguay it reached 7.6% over the previous year, as imported fuel prices soared 33.3% and local food products such as beef, chicken and vegetables rose 14.7%.

On Lima, consumer prices increased by 5.83% compared to the previous year, their biggest increase since January 2009.

The rise in food and energy represents a growing headache for Latin American policymakers, as early October inflation reports suggest that central banks will remain under pressure to raise interest rates in an attempt to mitigate the effects of second round prices.

In Paraguay, international oil prices will determine the trajectory of inflation for the rest of the year, according to the central bank’s chief economist, Miguel Mora.

“We are a taker of these international prices and a net importer of crude oil derivatives.”He said in a webinar after the data was released.

The central bank of Paraguay It noted that it will increase its benchmark rate by around 125 basis points in its last two policy meetings this year.

The rate now stands at 2.75% after policymakers raised it 200 basis points since August. Peru adjusted its monetary policy for the third consecutive month, raising its rate to 1.5% in October.