Peru | BCRP surprises the market resuming policy rate cuts

Summary

In its April decision, the Board of the Central Bank decided to cut the reference rate by 25 basis points to 6.00%. However, the monetary policy stance, understood as the real ex-ante reference rate, remains in restrictive territory.

Key points

• Key points:
• The policy rate now stands at 3.44% in real terms (March: 3.60%).
• The Bank noted that the monthly inflation observed in March is transitory and mainly explained by higher prices of some foods and beverages and the seasonal increase in the costs of education and transport.
• The authority expects inflation to continue its downward trend and gradually converge to the centre of the target range in the following months.
• One year ahead inflation expectations decreased from 2.65% in February to 2.56% in March.
• At BBVA Research we anticipate that from now on inflation will move towards the middle of the target range and perhaps at some point during the year will be closer to 2% than 3%, which will give the Central Bank room to continue lowering the policy rate in the coming months.

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