Inflation Forecast 1h – Jan

We expect headline inflation for the first half of January to settle at 0.51% bw, driven by tax increases on sugar-sweetened beverages and cigarettes, among other factors. Based on this forecast, annual inflation would stand at 3.97%

Typically, inflation for this biweekly period averages around 0.30% bw. Our higher estimate is explained by increased pressure within the core component (0.55% bw vs. the historical 0.25% bw). This trend responds to the hike in the IEPS (excise tax) on sugar-sweetened beverages (which rose from $1.6451 to $3.0818 per liter), the increase in the ad-valorem tax on processed tobacco (from 160% to 200%), and other fiscal changes weighing on non-food goods. We estimate these adjustments will contribute approximately 22 bps to the biweekly inflation figure.

Regarding non-core inflation, we expect an increase of 0.35% bw, below the historical average of 0.46% bw for this period. While the fruit and vegetable component faces upward pressure (1.22% bw vs. the historical 0.43% bw), these will be partially offset by lower pressure from energy prices (-0.17% bw vs. the historical 0.56% bw).

With this data, annual headline inflation would move from 3.66% to 3.97%, core inflation from 4.31% to 4.60%, and non-core inflation from 1.51% to 1.91%.