Published on Friday, March 8, 2024

Peru | Dovish pause

In its March decision, the Board of the Central Bank decided to maintain the reference rate at 6.25% but reduced reserve requirements in domestic currency from 6.0% to 5.5%. 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 3.60% in real terms (February: 3.61%).
  • The Bank noted that inflation showed a marked decreasing trend from June 2023 to January 2024, as some of the transitory effects on inflation due to supply restrictions of certain foods dissipated. However, in February inflation rose temporarily due to the increase in the prices of some foods and beverages, and water rates.
  • The authority expects inflation to continue its downward trend in the forecast horizon and return to the target range in the following months. The risks associated with climatic factors stemming mainly from the El Niño phenomenon are now reduced.
  • One year ahead inflation expectations increased from 2.6% in January to 2.7% in February.
  • At BBVA Research we anticipate that the year-on-year inflation rate will decline in March and will soon return to the target range, entering it in the second and third quarters. In this context, we estimate that the policy rate cuts will resume in April and the rate will close the year at 4.25%.

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