Published on Friday, September 15, 2023

Peru | BCRP cuts the rate despite the surprise increase in food inflation

In its September decision, the Central Bank Board decided to reduce the reference rate to 7.50%, but noted 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 4.14% in real terms (August: 4.18%).
  • The Bank remarked that inflation has been affected more than expected by food supply restrictions.
  • The monetary authority maintained its inflation forecast: it expects it to get close to the target range (2% +/- 1%) by the end of the year and reach it in the first months of 2024.
  • One year ahead inflation expectations decreased from 3.6% in July to 3.4% in August.
  • We consider that the Central Bank will continue to cut the policy rate by 25bps each month from October to December and then will pause in the summer of next year, resuming cuts when the uncertainty regarding the impact of the El Nino phenomenon and other factors has dissipated.

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