Consumer prices rose by 0.52% MoM in March, below the Bloomberg market consensus of 0.55% and our 0.58% call. The main positive contributors in the month were housing and utilities (+0.56% MoM; +17bps), food prices (+0.86% mom; +16bps) and hotels and restaurants (+0.57%; +6bps). Lower than expected housing and utilities inflation explained most of the surprise relative to our forecast. Consumer prices excluding food increased 0.45% MoM (+0.69% one year earlier), while inflation excluding food and energy rose by 0.49% MoM (+0.69% in March 2024). Overall, annual headline inflation fell by 19bps from February to 5.09% in March, while core inflation dropped by 22bps to 5.41% (10.60% peak in April last year; 8.8% at the end of 2023).
Despite remaining at high levels, services inflation fell 37 bps in March. Non-durable goods inflation (mainly food) came in at 3.9% yoy, falling 10bps from the previous month. Meanwhile, energy inflation fell to 3.4% yoy, a drop of 62bps from February. Durable goods inflation remained in negative territory at -1.89%, but increased 79bps from February. Services inflation dropped by 37bps to a still high 6.85% (9.51% peak in September). At the margin, we estimate that inflation accumulated in the quarter was 5.1% (SA, annualized; 4.5% in 4Q24). Core inflation fell to 4.7% from 5.4% in 4Q24 (SA annualized).
Our take: After a prolonged pause since November, the disinflationary process has resumed. Our preliminary estimate for April’s CPI, to be released on May 8, is between 0.4% and 0.5%, resulting in annual inflation falling to 4.95% (-14bps). Our YE25 CPI call is at 4.5% yoy. In an environment of global risk aversion, coupled with the internal fiscal imbalance, the BanRep Board may opt to remain cautious in the short-term despite the lower inflation. We expect a YE25 rate of 8.0%.