Peru: Central Bank stands pat in February; hikes possible ahead
At its 9 February meeting, the Central Bank of Peru kept its key policy interest rate unchanged at 7.75%.
The Bank decided to pause its tightening cycle as the economic situation has deteriorated since the start of the political and social crisis triggered by Pedro Castillo’s failed coup on 7 December. Meanwhile, inflation rose to 8.7% in January from December’s 8.5%, while inflation expectations over the next 12 months increased from 4.3% to 4.6%. That said, the Bank expects inflation to move back into the target range of 1.0–3.0% in the fourth quarter of 2023 amid lower international prices for food and energy, easing supply chain disruptions and decreasing inflation expectations. However, our panelists see inflation ending the year above target.
The Bank stated that February’s decision doesn’t mean the end of the tightening cycle and that it stands ready to resume hiking depending on future inflation figures and the evolution of economic activity amid the current social turmoil.
The next meeting is scheduled for 9 March.
The LatinFocus panel sees the monetary policy rate ending 2023 at 5.78% and 2024 at 4.35%.