The national government expects inflation to be below 2% in May and highlights the low impact of the floating dollar.

Thenational government anticipates that inflation in May will be lower than the 2.8% recorded in April , according to estimates presented by the Central Bank . The official assessment points to a moderate price shift following the adoption of the floating dollar scheme, which allowed the Consumer Price Index (CPI) to maintain its downward trajectory .

This was stated by the Vice President of the Central Bank of El Salvador (BCRA) , Vladimir Werning , during a presentation at the 18th Meeting of Central Bank Governors of CEMLA (Central Bank of El Salvador). He explained that the exchange rate pass-through to prices was the lowest in recent years , which he attributed to the combination of orthodox fiscal policy and successful anchoring of expectations .

Although the Central Bank declined to release an official projected figure for May, it did refer to private sector expectations , based on the Market Expectations Survey (REM) . It shows that banks, funds, and consulting firms estimate the CPI will close the month at around 2% , or even slightly lower.

"Analysts' inflation projections remain on a downward trajectory, and market-implicit inflation expectations are falling again," Werning told representatives of central banks across the continent.

The same diagnosis emerges from the implicit prices of bonds, which discount inflation below 2% per month, which consolidates the scenario of deceleration without the need for artificial price controls .

Among the consulting firms supporting this view is EcoGo , which projects a general CPI of 2% for May . In its latest report, it highlighted that food consumed at home rose just 0.2% in the fourth week of the month , with cumulative inflation of 2.5% in this specific category.

When including food consumed outside the home, which increased by 2.9%, the total Food and Beverage index would be 2.6% , which represents an improvement compared to previous months.

The consulting firm Analytica also showed low inflation data. During the third week of May, food and beverage prices in the Greater Buenos Aires region grew by only 0.2% , and the average for the last four weeks is 1.6% monthly .

The analysis by category reveals that the largest increases were in coffee, tea, yerba mate, and cocoa (3.1%) , followed by meat and meat products (2.5%) . In contrast, vegetables (0.4%) and fish and seafood (0.2%) showed almost zero increases . Overall, Analytica projects general inflation of 2.1% for May .

For its part, the consulting firm LCG reported a 0.2% weekly increase in food and beverages during the fourth week of May , following a 2.1% increase recorded the previous week. This data reinforces the sign of a consolidated slowdown in one of the sectors that has the greatest impact on lower-income sectors.

This decline in weekly food price increases, combined with limited tariff increases and a contractionary monetary policy, allows the government to move closer to its goal of controlled inflation without slowing activity .

One of the points the BCRA most emphasized was the low pass-through of the recent devaluation, following the transition to a managed floating rate regime with bands . According to Werning, this policy avoided the inflationary effect that could have generated an abrupt correction in the exchange rate.

The Central Bank's report explains that the initial devaluation in December 2023 was contained in its impact thanks to the 2% monthly crawling peg , and that the transition to the new floating rate scheme occurred within a solid fiscal framework and without issuance , which allowed expectations to remain anchored .

The Ministry of Economy assures that, if the trend continues, inflation could reach 2% monthly during the third quarter . Although the 7% increase in bus fares in the AMBA region and the rise in biofuel prices led to some adjustments, the slowdown in food prices was decisive in the decline in May.

Given this situation, the government believes the stabilization plan is moving in the right direction , without resorting to controls or freezes, but rather with fiscal discipline, a competitive exchange rate, and positive real rates .