Headline inflation hit a new 11-year record with a rate of 18.55% YoY. This confounded many market analysts that earlier forecast a decline in the headline rate to make December the point of inflection of the indicator in 14 months.
A further decomposition of the inflation dynamics suggests that a moderation of inflationary pressures is not farfetched. This is because of disappearing base year effects, a reduction in core inflation (18.1% from 18.2% in November) and a declining trend in 2016.
With these observations, we expect a change in inflation dynamics in Q1’17 as we observe that prices of perishable and inelastic goods, such as rice and beans, are declining.
In the attached bulletin, the FDC Think-Tank analyses price movements in December.