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Consumer prices remain virtually
unchanged in October
In October, consumer prices rose 0.05%. The virtual price stability rise
was broadly in line with market expectations of 0.10%, according to last
month’s Consensus. The October reading continues a string of five months
with either declining or virtually unchanged prices, which was only
briefly interrupted in September, when prices increased 0.56%. The price
stability observed in October was mainly the result of lower transport and
communication prices which mitigated the impact of higher prices for
housing, fuels and electricity.
Annual inflation rises slightly following on months of declines
As a result of the October price stability, annual headline inflation
dropped from 2.0% in September to 1.3%, continuing the downward trend
observed since March, when headline inflation had marked a temporary high
of 3.4%. If the current consumer price developments are sustained, Peru
could once more enter deflationary territory, which had plagued the
country in the first half 2002. However, Central Bank and Consensus
Forecast participants alike are confident that Peru will stay clear from
any deflationary bout in the near future. In October, the Central Bank
claimed that inflation will end the year close to the lower end of the 1%
tolerance margin around the central 2.5% target rate. The Consensus has
year-end inflation well above this latest Central Bank estimate, at 1.9%.
An exact call is very difficult at these levels, since a small monthly
price variation has a relatively large impact on the annual inflation
rate. If prices remain unchanged in the last two months of the year,
year-end inflation would come in at 1.7% compared to a 2.4% year-end rate
if prices were to rise by 0.3% in November and December.
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