Peru | No surprises, policy rate held at 4.25%

Summary

In January, the BCRP kept its policy rate at 4.25% for the fourth straight month. This neutral stance is consistent with an economy near its potential and inflation on target. We expect the policy rate to remain at this level in the coming months.

Key points

• Key points:
• The BCRP held its rate at 4.25%, a level within the estimated neutral range.
• The price outlook remains benign, with inflation expectations (2.1%) well-anchored within the target range.
• Domestic demand remains solid and will be temporarily bolstered by pension fund withdrawals early in the year.
• Upcoming elections and the normalization of inflation towards the center of the target rate limit the room for additional rate cuts.

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