Publications

The FOMC will likely continue to emphasize optionality and data dependence as possible inflationary pressures from tariffs could have been masked thus far by import frontloading and the offsetting cooling of shelter inflation.

Europe has managed to bring inflation back to the ECB’s target without triggering a recession, although the challenge now is to keep it there in an environment that is more exposed to global shocks.

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.

Elevated term premia likely driven by fiscal and institutional risks keep long-end yields high despite stable inflation expectations. Outside isolated episodes of turbulence, markets have reflected favorable conditions over the year and throughout the easing cycle.

For the fifth consecutive meeting, BanRep held the policy rate steady at 9.25% in a split decision. Although inflation eased in November, it remains above the target, in a context of dynamic domestic demand supported by high consumption.

The Board noted the uncertainty surrounding the inflation shock expected in early 2026 stemming from recently approved fiscal measures, which “are estimated to have a temporary effect, not necessarily proportional, on prices.”

At this stage, the Board will likely refocus on the risks associated with the persistence of core inflation—particularly in services—and on the temporary inflation shock expected in early 2026, despite the significant weakness of the economy and the strength of the MXN.