Peru | BCRP holds rate, but reiterates the possibility of an adjustment

The Central Reserve Bank of Peru (BCRP) kept the benchmark interest rate at 4.25% for the thirteenth consecutive month, surprising the market. However, it reiterated its willingness to make short-term adjustments, maintaining an upward bias as annual inflation rose to 4.5% in September.

Key points

• Key points:
• The decision to hold the rate surprised the market consensus, as 9 out of 13 analysts surveyed by Bloomberg expected a hike.
• Year-on-year inflation increased from 4.4% in August to 4.5% in September, mainly due to the rise in fuel and electricity prices.
• Twelve-month inflation expectations remained at 3.1%, slightly above the upper limit of the BCRP's target range.
• The BCRP warns that the El Niño phenomenon and geopolitical tensions could have persistent effects on inflation.
• The ex-ante real rate stands at 1.16%, below the estimated neutral rate of around 2%, suggesting that monetary policy is still accommodative.

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