Peru | BCRP maintains rate despite inflation outside the target range

Summary

The Central Reserve Bank of Peru maintained the interest rate at 4.25%, in line with expectations. Despite the inflationary rebound in March caused by supply shocks, the institution projects that inflation will return to the target range by the end of this year amid positive growth prospects.

Key points

• Key points:
• The BCRP maintained the interest rate at 4.25% for the seventh consecutive month, a decision aligned with the market, despite total inflation (3.8%) and core inflation (3.7%) being above the upper limit of the target range in March.
• The monthly inflationary spike of 2.38% responded to three transitory supply shocks: the rise in international fuel prices, the interruption of the gas supply in Camisea, and adverse climatic factors.
• The Central Bank expects that inflation will converge to the target range by the end of the year; it is essential to closely monitor the duration of the supply shocks.
• Twelve-month inflation expectations rose to 2.5% and, although they remain within the target range, an additional de-anchoring could compromise the neutral stance and trigger consideration of a tightening of monetary policy.

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