Consumer prices in Lima rose more in July than economists polled by Bloomberg had forecast, driven by higher food and transport costs, leaving annual inflation above the central bank's target band for a fifth straight month. INEI, the country's national statistics agency, published the figures on Saturday.
Lima's consumer price index, often treated as the standard gauge for national inflation, rose 0.29% from the previous month. The monthly advance likewise came in above the 0.25% median forecast. The outcome puts pressure on the Banco Central de Reserva del Peru, whose stated objective is to keep annual inflation within a 1%-3% corridor.
Since March, inflation has stayed above the ceiling of the central bank's range, with higher food costs compounding the worldwide energy shock. In recent years, Peru has been among the emerging-market countries with the lowest consumer-price growth.
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Peru's inflation streak is unusual for an economy that in recent years ranked among the emerging markets with the slowest consumer-price growth. The BCRP has held its benchmark rate at 4.25% for ten months, and its Aug. 13 decision will be scrutinized for any change in tone. If food and transport costs stay elevated, the central bank's projection of a return to the 1%-3% target by early next year could be tested. The July breakdown shows the pressure is broad: transport prices jumped 14.30% from a year earlier, restaurants and hotels rose 4.18%, and food and non-alcoholic beverages climbed 3.46%.
Central bank officials have projected that inflation will return to its target band by early next year, but they concede that risks remain elevated because El Niño could push food costs up again in the coming months.
The sharp increase in July transport prices is a reminder that inflationary pressures remain widespread, leaving officials with little room for complacency.
Peru's gross domestic product is still projected to expand by over 3% this year, helped by strong mineral prices and resilient consumer spending, even with the El Niño risk. Market sentiment is expected to brighten under President Keiko Fujimori's conservative government. She has chosen Elmer Cuba, formerly a central bank director and now a consultant, to oversee her economic program, and has nominated Julio Velarde to lead the central bank for another term.
During her first national address this week, Fujimori promised to keep fiscal discipline, cut bureaucratic hurdles to attract investment, and ease the path for small businesses to operate formally. The government intends to request temporary decree authority from Congress on important security and economic matters.
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