Peru | BCRP extends pause, but with a more hawkish tone

Summary

In December the BCRP kept its policy rate at 4.25%, surprising part of the market. The more hawkish tone of the statement and the improved macro environment support the view that policy is already neutral and that further rate cuts are unlikely.

Key points

• Key points:
• The BCRP left the policy rate at 4.25 %.
• The statement stressed that core inflation and inflation expectations are around the centre of the target range.
• We estimate the nominal neutral rate at 4.00%–4.50%; with the rate at 4.25% we do not expect additional cuts.
• Solid domestic demand, a more favorable external outlook, and the upcoming presidential elections limit the room for further monetary easing.

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