In the first quarter of 2019, inflation and core inflation indicators fell more than had been forecast in the previous Report, and remained close to the 3.0% target. Inflation expectations at different horizons decreased slightly and stand around observed inflation. The new figures for economic activity suggest that economic growth is still recovering from product levels lower than the country's natural output level. The current monetary policy stance is slightly expansionary.
In March, inflation stood at 3.21% (graph A) and the average of core inflation indicators is 2.82%. These figures are lower than was expected a quarter ago and close to the 3.0% inflation target. The lower actual inflation versus the forecast is explained mainly by tradables (0.9%) and non-tradables excluding food and regulated items (3.29%). Factors such as the scarce pass-through of the depreciation of the peso to domestic prices, the indexation of some prices to inflation last December (3.18%), and the spare capacity of the economy explain much of this behavior. Similar to the expectations, the food CPI (3.26%) continued to accelerate, especially due to the group of perishable goods. On the contrary, regulated items (6.42%) increased more than had been projected due to the increase in the rates for public utilities.