LIMA -- INEI reported that consumer prices in Metropolitan Lima increased 0.4% month-on-month in March, in line with market expectations according to a Bloomberg survey. Inflation in March was fueled by food prices, which increased 0.5% mom and added 0.2 percentage points to headline CPI.
In annual terms, headline inflation stood at 3.0%, in line with the consensus estimate, and unchanged from last month.
In the view of analysts, above-target inflation has been one of the main reasons why the central bank has refrained from lowering the policy rate further since its last 25bps rate cut in January 2015. Analysts expect the central bank to lower the policy rate one more time in the short term to 3.0% from 3.25%, although
high inflation and a weakening currency are risks to the call.
INEI also published advanced economic activity indicators for March. Mining production rose 8.7% yoy. Internal cement consumption, a proxy for the construction sector, rose 1.1% yoy, after having contracted 5.7% yoy in February.
Meanwhile, Finance Minister Alonso Segura said a few days ago that industrial production increased 5.6% year-on-year in March. These numbers suggest that GDP growth in March could be notably higher than the 0.9% yoy increase in February and the 1.5% average annual growth rate of the past eleven months.