Macroeconomic Forecast Puerto Rico

Consumer price inflation in Puerto Rico ended the calendar year at 3.3% y-o-y, just below our end-2011 forecast of 3.5%. As global commodity prices continue to moderate, easing imported inflationary pressure, and our expectations of a weaker domestic demand story in the coming quarters, we are sticking to our end-2012 inflation forecast of 3.0% y-o-y for the time being. We note however, that a weaker global economic outlook and a further consolidation in global commodity prices (not our core scenario) poses modest downside risk to this view.

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