The year-on-year increase in consumer prices reached 2.89% during July, the first month of the Value Added Tax (VAT), compared with 2.42% the previous month, the Instituto Nacional de Estadística y Censos (National Institute of Statistics and Censuses) reported.

Inflation accelerated with the entry, in July, of Value Added Tax (VAT).

The number remains within the target range of the Banco Central (Central Bank) of between 2% and 4%.

The rise in the price of electricity service, professional fees, haircuts, tour packages, and many others were reflected in an increase of 0.73% over the previous month.

With the VAT, the tax level of 13% is maintained, but it was extended to a series of services, while concerns that some companies would increase their prices to anticipate the impact it would have on their business.

However, last month, also increased was the price of tomatoes, onions, and potatoes, all exonerated products being part of the ‘basic tax basket’, which may reflect climate impact or other factors that affect agriculture.

The impact of VAT on prices would be relatively low, and no second-round inflationary effects are required that need to be mitigated, according to Central Bank estimates.

However, the entry of the tax saw inflation rise to 3%, uncertainty persists due to slow economic growth and a high unemployment rate that hit 11.9%.

Source La Republica