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Peru Inflation July 2021

Peru: Inflation hits highest level since March 2017 in July

Consumer prices rose 1.01% from the previous month in July, picking up from the 0.52% increase recorded in June. July’s figure was mainly driven by rising food and beverage costs, and a faster increase in housing prices, but was also aided by a marked depreciation in the sol during the past few months.

Inflation rose to 3.8% in July, above June’s 3.3% and marking the highest inflation rate since March 2017. As a consequence, annual average inflation rose to 2.4% in July (June: 2.2%). Lastly, core inflation inched up to 2.3% in July, from June’s 2.0%.

Regarding the impact on monetary policy, Alberto Ramos and Daniel Moreno, economists at Goldman Sachs, commented:

“The large unfavorable June–July surprises increased very significantly the likelihood of very near-term policy rate normalization lift-off. […] We argue that given that the policy rate is currently at an historical low 0.25% and the ex-ante real policy rate has continued to decline, a 25bp rate hike at the next meeting would in fact still maintain a highly accommodative/expansionary monetary stance.”

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