(Bloomberg) -- Peru's inflation slowed more than expected in January as transportation prices fell, providing a welcome relief to the central bank which faced in 2021 the fastest rise in prices in 13 years.
Annual inflation slowed to 5.68%, compared with the 5.99% median forecast of analysts surveyed by Bloomberg. Consumer prices increased 0.04% from December, the national statistics bureau reported Tuesday.
Prices for food, energy and fuel surged in Peru and across Latin America last year as the pandemic and lockdowns spurred supply-chain snarls and shortages. Peru's central bank, like regional peers, has mounted an aggressive monetary tightening cycle by raising its key rate 275 basis points since August to 3%. The central bank, which targets inflation of 2%, plus or minus one percentage point, meets next week.
What Bloomberg Economics Says
“In the January meeting the central bank sounded more hawkish, opening the door for a hike of more than 50 bps. A hike of 75 bps is still possible, but lower inflation today increase the probability of them doing another 50 bps next week. Weak activity in November supports that view. Lower inflation today is NOT enough for them to pause or signal the tightening cycle is over. Headline and core are still high, the relief today was mostly due to non-core and base effects. Inflation risks are still bias to the upside.”
-- Felipe Hernandez, Latin America economist
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In January, cheaper bus and plane tickets contributed to a 1.08% decline in transportation costs. Housing, water and electricity prices dropped 0.21%.
The central bank's 12-month inflation expectations survey for December edged down marginally to 3.68% from 3.71% a month earlier.
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