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PERU: CPI Inflation Falls To Lowest Since 2018, As Expected

PERU
BulletPeruEM BulletEmerging Market News
  • CPI inflation fell to its lowest level since September 2018 in February, keeping the door open to a further possible rate cut later this month. Data released on Saturday showed that headline consumer prices rose by 0.19% m/m last month, broadly as expected, following a 0.09% m/m decline in January. Given strong base effects, this brought the annual rate of inflation down to 1.48% y/y, from 1.85%, close to the 1.47% consensus. Core inflation also remained well contained, with the annual measure falling to 2.1% y/y, from 2.4%, while services inflation declined by 37bp to 2.5%.
    • Goldman Sachs sees m/m inflation firming in March due to the seasonal resetting of education tuition fees, but expects the annual measure to decline further on the relatively high base from the year before. They see annual inflation closing 2025 at a modest 2.2%. They note that thus far there is limited evidence of any passthrough from the sizable 10% minimum hike to prices in the labour-intensive services sector.
    • Meanwhile, BBVA said that the low read will likely keep the central bank comfortable in its easing cycle, with it potentially considering additional cuts.
    • The next BCRP MPC meeting is scheduled for March 13. Last month, the central bank stayed on hold at 4.75%, while maintaining a data dependent stance. Governor Velarde has said that he expects headline inflation to fall to 1% by the end of March, before picking up again to close the year at around the 2% target.
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  • CPI inflation fell to its lowest level since September 2018 in February, keeping the door open to a further possible rate cut later this month. Data released on Saturday showed that headline consumer prices rose by 0.19% m/m last month, broadly as expected, following a 0.09% m/m decline in January. Given strong base effects, this brought the annual rate of inflation down to 1.48% y/y, from 1.85%, close to the 1.47% consensus. Core inflation also remained well contained, with the annual measure falling to 2.1% y/y, from 2.4%, while services inflation declined by 37bp to 2.5%.
    • Goldman Sachs sees m/m inflation firming in March due to the seasonal resetting of education tuition fees, but expects the annual measure to decline further on the relatively high base from the year before. They see annual inflation closing 2025 at a modest 2.2%. They note that thus far there is limited evidence of any passthrough from the sizable 10% minimum hike to prices in the labour-intensive services sector.
    • Meanwhile, BBVA said that the low read will likely keep the central bank comfortable in its easing cycle, with it potentially considering additional cuts.
    • The next BCRP MPC meeting is scheduled for March 13. Last month, the central bank stayed on hold at 4.75%, while maintaining a data dependent stance. Governor Velarde has said that he expects headline inflation to fall to 1% by the end of March, before picking up again to close the year at around the 2% target.