Peru: Inflation jumps further above target in January

Consumer prices for Metropolitan Lima increased 0.37% in January over the previous month, which was below the 0.45% rise registered in December. This was stronger than the 0.30% increase expected by market analysts. The monthly rise mainly reflected higher prices for rentals, fuels and electricity. The weak Peruvian sol is also contributing to inflationary pressures.

Inflation increased from 4.4% in December to 4.6% in January, which marked the highest reading since December 2011. Consequently, inflation moved further above the upper limit of the Central Bank’s target of 2.0% plus/minus 1.0 percentage points.

The core consumer price index, which excludes volatile items such as fresh food and fuels, rose in January by 0.29% month-on-month (December: +0.26% month-on-month). Finally, core inflation remained stable at December’s 4.1% in January.

The Central Bank indicated that it expects inflation to be between 2.5% and 3.0% in 2016 and between 2.0%-2.5% in 2017. Panelists participating in the LatinFocus Consensus Forecast expect inflation to end 2016 at 3.2%, which is unchanged from last month’s projection. For 2017, the panel expects inflation of 2.8%.