Peru | BCRP cuts policy rate but maintains caution due to the proximity of El Niño

In its December decision, the Central Bank Board decided to reduce the reference rate to 6.75% but maintained that this does not imply a cycle of successive interest rate cuts. The monetary policy position, understood as the real ex-ante reference rate, remains in restrictive territory.

Key points

• Key points:
• The policy rate now stands at 3.60% in real terms (November: 3.67%).
• The Bank noted that inflation has been showing a more marked downward trend since June, given that some of the transitory effects on inflation due to restrictions on the supply of certain foods are dissipating.
• The authority expects that inflation will return to the target range (2% +/- 1%) within the next few months (previously: “at the beginning of next year”) and that inflation without food and energy will be within the target range at the end of this year.
• One year ahead inflation expectations decreased from 3.3% in October to 3.2% in November.
• We consider that the Bank will remain in data-dependent mode, paying particular attention to the evolution of inflation and whether it consolidates within the target range, which will surely be closely linked in the short term to the impact of the climate anomalies. If these continue to lose strength and are finally more moderate than what is so far expected in the summer of 2024, the Central Bank could be encouraged to continue with the rate cuts.

Authors

Geographies

Topics

Tags