Inflation in Peru

A short history of inflation in Peru

Hyperinflation (1988 to 1990)

Peruvian prices rose by more than seven thousand per cent in 1990. The causes were a government that had cut itself off from international lenders by unilaterally limiting debt payments, a widening deficit financed by the central bank, and price controls that produced shortages rather than stability. The currency was replaced twice in five years as the zeros accumulated.

Stabilisation and the Nuevo Sol (1990 to 1994)

The programme launched in August 1990 removed subsidies and controls almost overnight, with petrol prices rising some thirtyfold in a day, and stopped the central bank financing the government. The nuevo sol replaced the inti in July 1991 at a million to one. Peru adopted an inflation target in 2002 and has since had among the lowest and steadiest inflation in Latin America, an unusually complete reversal.

Post-Covid Inflation (2021 to 2023)

In Peru, prices rose fastest in June 2022, at 9.3%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.