Peru | BCRP holds rate at 4.25%, but we see risk of persistent inflation

Summary

The Central Reserve Bank of Peru decided to maintain its benchmark interest rate at 4.25% for the eleventh consecutive month. Although inflation is expected to return to the 2% target range, there are warnings of risks such as the El Niño phenomenon and geopolitical tensions that could generate more persistent effects.

Key points

• Key points:
• Total year-on-year inflation increased from 4.0% in June to 4.1% in July, while inflation excluding food and energy rose from 4.5% to 4.6%.
• Twelve-month inflation expectations increased from 2.8% to 3.0%, reaching the upper limit of the Central Bank's target range.
• The ex-ante real interest rate stands at 1.24%, below the estimated neutral rate of around 2%, suggesting a less contractionary monetary stance.
• Domestically, a more intense El Niño phenomenon could generate new pressures on food prices towards the end of the year.

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