Peru | BCRP holds rate at 4.25%, but further monetary tightening cannot be ruled out

Summary

The BCRP kept its policy rate at 4.25% for the ninth consecutive month. Headline inflation (3.9%) and core inflation (4.4%) remain above the target, and according to the statement, convergence will extend into 2027. We do not rule out the possibility that the BCRP may adjust its policy during the second half of the year.

Key points

• Key points:
• The BCRP kept its policy rate at 4.25% for the ninth consecutive month. Headline inflation declined from 4.0% to 3.9%, while core inflation remained at 4.4%, with both above the upper bound of the target range.
• Twelve-month inflation expectations increased from 2.8% to 2.9%, remaining within the target range but showing a sustained upward trend since February (2.1%).
• The BCRP projects convergence to 2% in 2027, due to the persistence of supply shocks.
• With core inflation and expectations showing resistance to decline, and supply shocks lasting longer than expected, we cannot rule out the possibility that the BCRP may decide to adjust monetary policy during the second half of the year.

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