Peru | BCRP resumes normalization of the policy rate, bringing it closer to neutral

Summary

In its November meeting, the Board of the Central Bank decided to cut the policy rate by 25 basis points to 5.00%. The monetary policy stance, understood as the real ex-ante reference rate, remains above neutral.

Key points

• Key points:
• The policy rate now stands at 2.55% in real terms (October: 2.82%).
• The authority expects headline and core inflation to remain close to the centre of the target range (2% +/- 1%) in the following months.
• One year ahead inflation expectations increased from 2.43% in September to 2.45% in October, within the inflation target range.
• At BBVA Research, we foresee two additional 25 basis point cuts to the reference rate in the following months. Considering that the Central Bank has explicitly stated it will return to a data-dependent mode, we condition our expectation of rate cuts on the absence of pressures in the foreign exchange market.

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