Peru | BCRP increases the reference rate to 3,00% and signals further hikes

Summary

The Board of the Central Bank decided to increase the monetary policy rate from 2,50% to 3,00% in January. The Bank changed the forward guidance component, signaling further hikes.

Key points

• Key points:
• The policy rate increased by 50 basis points for the fifth time in a row.
• The Bank argued that the higher inflation observed in December is a result of transitory supply factors such as the increase in the international price of food inputs and fuels, coupled with a higher exchange rate.
• The monetary authority now expects inflation to return to the target range (2% +/- 1%) in the fourth quarter of the year (previously, in the second semester).
• We expect the Central Bank to continue hiking, putting the reference rate at its neutral level in the second quarter.

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