Panama Inflation


Panama: Inflation jumps despite flat monthly reading

October 13, 2010

In September, consumer prices remained flat over the previous month, which came in well below the previous month's 0.55% increase. According to the National Comptroller's Office (Contraloria General de la Republica), lower prices for food and non-alcoholic beverages as well as for transport compensated for higher prices for clothing and footwear as well as for household equipment. Despite the flat monthly reading, annual headline inflation jumped from the 3.6% recorded in August to 4.2%, the highest rate observed since February 2009. Thus, inflation appears to continue to move away from the moderate levels historically observed in the country. Panama registered an average inflation rate of 1.4% in the 15 years prior to the price surge that started in May 2007 and which peaked at 10.0% in September 2008. In the country's dollarised economy, authorities can neither use monetary policy nor adjust the exchange rate to reduce inflation. The government expects inflation to remain below 3.0% this year. Consensus Forecast participants expect headline inflation to moderate and end this year at 3.6%, which is up 0.1 percentage points from last month's forecast. For next year, panellists expect inflation to decrease to 2.8%.

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