Economics: Even as core prices show little movement, inflation continues to trend lower but could reverse course in the medium term
In January, inflation broke well over a full percentage point below readings of a year prior. This is the latest sign of a clear downward trend that has largely been the result of the deceleration of non-core inflation’s agricultural products component, which has registered significant decreases. In contrast, core inflation was 3.66% last January, maintaining a downward trend in previous months until stabilizing at a level close to 3.6% in December 2024.
Although the inflation data are apparently favorable at this point, some factors could generate a resurgence in the medium term, such as pressure from producer prices. The Producer Price Index has rebounded in recent months, reaching annual growth of 7.86% in January of this year. This could imply an additional percentage point in annual inflation, returning it to a range of 5.0%-5.3%.
In the face of such an upturn in inflation, especially in products contained in the minimum consumption basket, we think there is a temptation for the Federal Government to impose price controls that would carry market implications that could send product prices higher. In this week’s Economic Outlook, we analyze the recent evolution of inflation and factors that could generate pressures in the coming months. And in our review of this past week’s key economic indicators, we detail the GDP report for the fourth quarter, as well as the retail sales indicator.
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