Peru | BCRP holds rate: higher inflation would be transitory

Summary

In March, the BCRP kept its rate at 4.25% for the sixth straight month, as expected by the market. Higher inflation reflects three transitory supply shocks. Monitoring inflation expectations will be key to sustaining the current neutral stance.

Key points

• Key points:
• The BCRP held its policy rate at 4.25% for the sixth consecutive month, consistent with the estimated neutral range of 4.00% to 4.50%.
• Headline inflation rose from 1.7% to 2.2% and core inflation from 2.0% to 2.2%, driven by higher water tariffs and supply-side food price pressures.
• The BCRP identifies three transitory shocks —adverse weather, higher oil and gas prices, and the Camisea energy supply disruption— as the cause of a temporary move to the upper half of the target range.
• Inflation expectations (2.1%) remain anchored near the midpoint of the target range; their evolution will be key to sustaining the current neutral stance.

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