Inflation Rate YoY in PY: December 2025 Analysis and Macro Outlook
The latest inflation rate YoY for PY, released on December 2, 2025, held steady at 4.10%, matching November’s reading and slightly below the 4.20% consensus estimate. This stability follows a volatile year marked by inflation peaks near 4.60% in September and troughs around 3.60% in June. Using data from the Sigmanomics database, this report compares recent inflation trends with historical patterns and assesses the broader macroeconomic implications for PY’s economy.
Table of Contents
The inflation rate in PY remains moderate at 4.10% YoY as of December 2025, unchanged from November and below the 4.20% forecast. This figure is consistent with the average inflation rate of 4.10% over the past 12 months, reflecting a period of relative price stability after mid-year fluctuations. Inflation peaked at 4.60% in September, the highest since early 2025, before easing back. The persistence of inflation above the central bank’s 3.50% target signals ongoing price pressures, albeit contained.
Drivers this month
- Shelter costs contributed 0.15 percentage points, reflecting steady housing demand.
- Food prices added 0.10 percentage points, driven by seasonal supply constraints.
- Energy inflation remained flat, contributing 0.00 percentage points, reflecting stable global oil prices.
- Used vehicle prices declined slightly, subtracting -0.05 percentage points.
Policy pulse
The current inflation rate sits above the central bank’s 3.50% target but below the 5% upper tolerance band. This suggests a cautious stance for monetary policy, with no immediate rate hikes expected but continued vigilance warranted.
Market lens
Immediate reaction: The PYG currency weakened 0.30% against the USD in the first hour post-release, reflecting mild disappointment versus expectations. Short-term bond yields rose 5 basis points, signaling modest inflation risk repricing.
Inflation’s trajectory in PY is closely linked to core macroeconomic indicators such as GDP growth, unemployment, and wage trends. Recent GDP growth has averaged 2.80% YoY, supporting moderate demand-pull inflation. The unemployment rate remains low at 4.20%, sustaining wage pressures that feed into consumer prices. Wage growth averaged 3.50% YoY over the past year, outpacing productivity gains and contributing to inflation persistence.
Monetary policy & financial conditions
The central bank has maintained its benchmark interest rate at 5.25% since September 2025, balancing inflation control with growth support. Financial conditions remain moderately tight, with credit spreads stable and lending growth slowing to 3.10% YoY. Inflation expectations, as measured by breakeven rates, hover near 3.80%, indicating confidence in medium-term price stability.
Fiscal policy & government budget
Fiscal policy remains moderately expansionary, with a 2025 budget deficit of 3.20% of GDP. Government spending on infrastructure and social programs supports demand but risks fueling inflation if unchecked. Tax revenues have grown 5% YoY, helping to partially offset spending increases.
Drivers this month
- Housing inflation steady at 0.15 pp.
- Food inflation stable at 0.10 pp.
- Energy prices neutral at 0.00 pp.
- Used cars easing -0.05 pp.
This chart highlights inflation’s recent plateau after a summer dip. The trend suggests price pressures are contained but not abating, requiring close monitoring of supply-side factors and wage dynamics.
Policy pulse
Inflation remains above the central bank’s target, but the lack of acceleration reduces immediate pressure for tightening. The bank is likely to maintain current rates while signaling readiness to act if inflation rises further.
Market lens
Immediate reaction: PYG depreciated 0.30% versus USD, while 2-year government bond yields rose 5 basis points, reflecting cautious investor sentiment amid steady inflation.
Looking ahead, inflation in PY faces several upside and downside risks. Bullish scenarios (20% probability) envision inflation rising above 4.50% due to stronger wage growth and supply bottlenecks. The base case (60%) expects inflation to hover near 4.00–4.20%, supported by stable commodity prices and moderate fiscal stimulus. Bearish scenarios (20%) see inflation falling below 3.50% if global energy prices decline sharply and domestic demand softens.
External shocks & geopolitical risks
Global commodity price volatility and geopolitical tensions in key trade partners could disrupt supply chains, pushing inflation higher. Conversely, easing tensions and improved trade flows could ease price pressures.
Structural & long-run trends
Long-term inflation in PY is influenced by demographic shifts, productivity growth, and technological adoption. Slower productivity gains and aging populations may sustain moderate inflation, while digital transformation could dampen costs over time.
In summary, PY’s inflation rate of 4.10% YoY in December 2025 reflects a stable but elevated price environment. The central bank’s cautious stance, combined with moderate fiscal expansion and steady financial conditions, suggests inflation will remain near current levels in the near term. External shocks and structural factors will be key to watch for shifts in this trajectory.
Investors and policymakers should prepare for a range of outcomes, balancing inflation control with growth support. Continued data monitoring from the Sigmanomics database will be essential to navigate evolving risks and opportunities.
Key Markets Likely to React to Inflation Rate YoY
Inflation data in PY typically influences currency, bond, equity, and commodity markets. The following five symbols have historically shown strong correlations with inflation movements, making them critical for traders and analysts monitoring PY’s economic outlook.
- PYGUSD – The PY guarani’s exchange rate versus USD reacts sensitively to inflation surprises and monetary policy shifts.
- IBPY – PY’s benchmark equity index, reflecting corporate earnings impacted by inflation and input costs.
- BTCUSD – Bitcoin often acts as an inflation hedge, with price movements linked to inflation expectations.
- EURUSD – Euro-dollar pair, relevant due to trade and capital flows affecting PY’s external sector.
- US10Y – US 10-year Treasury yields influence global risk sentiment and capital costs impacting PY.
Extras: Inflation Rate vs. PYGUSD Since 2020
Since 2020, PY’s inflation rate and the PYGUSD exchange rate have shown an inverse relationship. Periods of rising inflation typically coincide with PYG depreciation, reflecting concerns over purchasing power. For example, the 2025 inflation peak at 4.60% in September correlated with a 1.50% drop in PYGUSD over the same month. This dynamic underscores the currency’s sensitivity to inflation trends and central bank policy expectations.
FAQs
- What does the Inflation Rate YoY indicate for PY?
- The Inflation Rate YoY measures the annual change in consumer prices in PY, indicating the pace of price increases and cost of living changes.
- How does the latest inflation reading compare historically?
- The current 4.10% rate matches November’s figure and is near the 12-month average, below the September peak of 4.60% and above the June low of 3.60%.
- What are the main risks to PY’s inflation outlook?
- Upside risks include wage growth and supply shocks; downside risks involve falling commodity prices and weaker demand.
Final Takeaway
PY’s inflation rate remains stable but elevated, requiring balanced policy to sustain growth while containing price pressures.
PYGUSD – PY guarani exchange rate sensitive to inflation and monetary policy.
IBPY – PY benchmark equity index reflecting inflation impact on corporate earnings.
BTCUSD – Bitcoin as an inflation hedge influencing investor sentiment.
EURUSD – Euro-dollar pair affecting PY’s trade and capital flows.
US10Y – US 10-year Treasury yields impacting global risk and capital costs.
The December inflation rate of 4.10% matches November’s figure and aligns with the 12-month average of 4.10%. This stability follows a peak of 4.60% in September and a low of 3.60% in June, illustrating a moderate inflation cycle over 2025.
Month-over-month, inflation has plateaued after a gradual rise from mid-year lows. The persistence of inflation above 4% contrasts with the 3.50% target, signaling ongoing cost pressures in key sectors such as housing and food.