Peru | BCRP extends pause in November: Policy rate remains at 4.25%

Summary

The BCRP kept its policy rate at 4.25% in November, consolidating the pause initiated in October. This essentially neutral monetary policy stance is consistent with the benign outlook for prices and with economic activity around its potential.

Key points

• Key points:
• The decision to maintain the policy rate at 4.25% in November confirms that it remains “very close to the estimated neutral level,” a description the BCRP has used in its recent statements.
• There were no substantial changes in the BCRP's assessment in this month's statement: the outlook for prices remains benign (with headline inflation trending toward the center of the target range) and activity is around its potential level.
• This scenario is consistent with our view at BBVA Research. We estimate the neutral nominal rate to be in a range of 4.00% - 4.50%, and given that the current rate (4.25%) is comfortably within that interval, we maintain our forecast of no additional cuts.
• In our opinion, the room for additional cuts is limited by factors such as the expected normalization in inflation, strong domestic demand (particularly private spending), and the temporary boost from pension fund withdrawals.

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