- Peru: Inflation increased in April, but it does not cause concern
Monthly inflation was positive in April (chart 1). General inflation increased while core inflation remained stable, but they both continue to be comfortably below the mid-point of the target range (2.0%). We maintain our 2.3% scenario for general inflation in 2025 and 4.50% for the terminal reference rate.
Headline inflation stood at +0.32% monthly in April, slightly above the 0.2% expected by us, the Bloomberg market consensus and the historical average of the last 20 years (0.23%). With this, annual inflation increased from 1.28% in March to 1.65% in April, continuing below the mid-point of the Central Reserve Bank’s (BCR) target range.
The increase in general inflation during the month is explained by higher prices in the food and non-alcoholic beverages category (0.94%) due to higher chicken prices caused by lower production levels and increased fish prices due to the Easter seasonal factor, restaurants and hotels (+0.20%) and transportation (0.16%) due to Easter vacations.
Core inflation, the trend component that excludes food and energy, also increased by 0.13% in April, close to the historical average of the last 20 years (+0.14%) and the level recorded in the same month of 2024 (0.11%). In year-on-year terms, it remained stable at 1.9%.
For May, general inflation is likely to be negative, correcting the seasonality of prices seen in April. Moving forward, inflation would continue to increase slightly, reaching the 2.3% we expect by the end of the year. Regarding core inflation, it would still remain around 1.9% for a few more months.
Regarding the reference rate, at the next BCRP board meeting on May 8th, it would again remain unchanged at 4.75% (chart 2). Based on current inflation alone, one might expect the BCRP to lower its rate; however, it could have done so in March or April, when inflation levels were lower than they are now, but it did not. This could be because the Central Bank is waiting for greater clarity on the impact of U.S. policies. On the other hand, the differential between the Fed and the BCRP is only 25 bps, it would be prudent for the BCRP to wait for the Fed to take the first step.
—Ricardo Avila
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