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Peru Inflation February 2021

Peru: Inflation slides in February

Consumer prices in Metropolitan Lima dropped 0.13% in February over the previous month, swinging from the 0.74% rise logged in January. February’s result marked the sharpest fall in prices since June 2020 and was predominantly driven by falling food prices.

Inflation came in at 2.4% in February, from January’s 2.7%. Meanwhile, the trend was unchanged with annual average inflation coming in at January’s 1.9% in February. Core inflation fell to 1.6% from January’s 1.7%.

Regarding the outlook and implications for interest rates, Yalina Crispin, senior economist at BBVA Research, commented:

“In our baseline forecast scenario, inflation will close the year around 2%. This forecast considers that demand-side inflationary pressures will remain contained. It also assumes that the local currency will tend to strengthen in 2021, after the general elections. The risks to this forecast are mainly upside, considering the recent behavior of the international prices of fuels and food supplies. However, even if some of these upside risks materialize, particularly higher commodity prices, we estimate that the Central Bank of Peru has room to maintain its policy rate at 0.25% until at least the end of the year.”

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