Peru ends 2023 with inflation rate of 3.24%

Peru’s inflation through 2023 closed at 3.24%, the lowest annual rate in three years, official data showed on Monday after consumer prices rose marginally in December, a small boost for the country in the throws of an economic recession.

The central bank had initially projected inflation in 2023 would end at 3.8%, before adjusting its forecast to 3.1% last month following a string of promising inflationary indicators that saw a quicker-than-expected recovery.

Data from national statistics agency INEI showed the key prices index – based on the metropolitan region of Lima – rose in December by 0.41%.

The 2023 inflation rate (PECPI=ECI) is the lowest rise since 2020, when prices in the mining nation rose 1.97% for the year, and also stands as one of the lowest rates in Latin America.

The latest data brings Peru’s inflation within a breath of the central bank’s target range of 1% to 3%, which it had not officially forecast to reach until the end of the first quarter of 2024. At the start of 2023, consumer prices in Peru had risen 8.66% in the 12 months through January.

It comes after the central bank cut its reference interest rate to 6.75% in mid-December for the fourth consecutive month.

Nonetheless, the world’s second-largest copper producer is struggling with the adverse effects of the El Nino weather phenomenon, lower private investment mainly in mining and the threat of more anti-government protests.

The central bank has warned that the fight against inflation could be hampered by a stronger El Nino in 2024.

INEI said in a statement that inflation in December was driven by price hikes in restaurants and hotels (6.64%), education (6.40%) as well as food and non-alcoholic drinks (3.74%).

Analysts at BBVA at the start of the year had predicted 2023 inflation would end above 4%.