Peru | Policy rate remains at 4.25%, but upside inflation risks are emerging

Summary

BCRP kept its policy rate at 4.25% for a tenth straight month, in line with expectations. Headline (4.0%) and core (4.5%) inflation remain above target, and the statement points to somewhat slower convergence. We do not rule out a policy rate adjustment in the coming months.

Key points

• Key points:
• The BCRP kept the policy rate at 4.25% for the tenth consecutive month. Headline inflation increased from 3.9% to 4.0%, while core inflation rose from 4.4% to 4.5%, with both remaining above the upper bound of the target range.
• Twelve-month inflation expectations eased from 2.9% to 2.8%, remaining within the target range.
• The BCRP continues to project inflation converging to 2% over the policy horizon (approximately two years), reflecting the persistence of supply-side shocks.
• With core inflation and inflation expectations proving sticky, and supply shocks lasting longer than anticipated, we cannot rule out the possibility that the BCRP may decide to tighten monetary policy in the coming months.

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