Peru Inflation Unexpectedly Jumps as Near-Zero Rate May Not Last

(Bloomberg) -- Peru's inflation unexpectedly accelerated in June, led by food and household costs, after the central bank indicated that the country's key interest rate may not remain at a record low for long.

Consumer prices rose 0.52% from the month prior, more than double the 0.2% increase forecast by analysts surveyed by Bloomberg. From a year ago, prices jumped 3.25%, the most in more than four years and above the upper ceiling of the target, according to data published on Thursday by INEI, the nation's statistics bureau.

With the Peruvian economy reeling from the pandemic as well as political uncertainty related to last month's unresolved presidential elections, the central bank has removed a pledge to keep the benchmark interest rate at an all-time low of 0.25% for a “prolonged period.” It has also lifted its inflation forecast for this year to 3% from a previous 2%.

Read More: Peru Holds Key Interest Rate Near Zero, But Changes Guidance

Food and beverages, which have the greatest weight on the index, jumped 0.79% from May, while fuel, electricity and rentals rose 0.73%, INEI said. Excluding volatile food and energy prices, however, core inflation stood at a more moderate 0.2%, according to Goldman Sachs Group Inc.

Peru targets inflation of 2% a year, with a tolerance range of plus or minus 1 percentage point.

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