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12/12/12

Peru inflation



If I felt like splitting hairs on this subject and really picking at some nits, I'd go back to the time Peru's inflation level was nearing its peak, that pleasant 2008 just around the Lehman/Subprime thing that your great-grandfathers may have told you about, and recall that Peru's then FinMin complained bitterly about the way inflation was calculated at the time. It wasn't fair (said he) that nearly 50% of the representative basket was food, because Peru is all modern and thrusting and new and it's not the same at it used to be when people spent most of their income on essentials such as food and housing. However, the system didn't change and now the headline rate benefits. No need to factor in those expensive and incredibly taxed iPads and iPhones, let's make sure the whole thing stays based around potatoes and rice and chicken.

But yeah, it is splitting hairs, because thanks mainly to Julio Velarde at the Peru Central Bank (BCRP) and aided and abetted by a succession of FinMins that have had just enough brains to realized that autopilot is a good thing so DON'T TOUCH THOSE CONTROLS!, all based around the way in which Peru's trade balance surplus and tight monetary policy has seen the currency appreciate well, Peru's got this inflation monster by the throat and is squeezing hard. The above chart is consequence of smart economic policy and should be applauded.