Peru | BCRP cuts policy rate by 25 bps, bringing it close to its neutral level

Summary

At its May meeting, the Board of the Central Bank lowered the reference interest rate to 4.50%. The monetary policy stance, understood as the ex-ante real reference rate, thus stands close to the level estimated to be neutral.

Key points

• Key points:
• The authority expects headline inflation (currently at 1.7%) to return to the center of the target range (2.0%) and, together with core inflation, to remain around that rate over the projection horizon. It also states that economic activity is now around its potential level.
• The statement accompanying this decision noted that restrictive measures on international trade have led to a deterioration in global economic activity prospects.
• The policy rate cut takes place in a context of recent developments regarding progress in negotiations between the U.S. and some of its main trading partners, as well as a recent decline in the exchange rate.
• At BBVA Research, we anticipate that the central bank will continue to act cautiously and that, for the time being, the policy rate will remain at its current level over the coming months.

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