This increase in inflation is being temporarily fuelled by the depreciation of the dollar since the beginning of 2013, as well as by some sectoral factors, particularly higher prices for meat and communications services. Since there is still material excess capacity in the economy and competitive pressures remain intense in the retail sector, the Bank estimates that underlying inflation remains below target.
On top of this, the economy is also faced with the steep decline in oil prices. Its impact is already being felt, and the inflation rate fell to 1.5 per cent in December. The Bank predicts that this rate will continue to decline, bottoming out at a level slightly above zero in the second quarter of 2015 (Chart 8).