Peru | BCRP raises rate to 4.50% and does not rule out further adjustment

The BCRP raised the benchmark interest rate to 4.50% due to supply shocks, rising inflation expectations, and strong domestic demand. The decision addresses the persistence of El Niño effects and geopolitical tensions in the Middle East to ensure inflation returns to the target range.

Key points

• Key points:
• The decision to raise the benchmark interest rate from 4.25% to 4.50% was in line with market expectations.
• Year-on-year inflation increased from 4.5% in September to 5.3% in October, while core inflation (excluding food and energy) rose from 4.5% to 4.6%.
• Twelve-month inflation expectations remained at 3.1%, slightly above the upper limit of the central bank's target range.
• Inflation is expected to increase in the coming months, especially in the first two months of next year, due to the intensification of the effects of the El Niño phenomenon.
• Although the BCRP does not anticipate a cycle of successive hikes, further adjustments to monetary policy are not ruled out to ensure inflation returns to the target range.

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