Peru: Central Bank of Peru decreases interest rate in January
Latest bank decision: At its meeting on 10 January, the Central Bank of Peru (BCRP) decided to reduce the policy rate by 25 basis points to 4.75%, taking total rate cuts since mid-2023 to 300 basis points.
Monetary policy drivers: The key factors influencing the Central Bank’s decision were recent inflation and future inflation projections that were comfortably within the BCRP’s 1.0-3.0% target range.
Policy outlook: The Central Bank suggested that the policy rate was now close to the neutral level, and forward guidance was open-ended. All our panelists see at least one extra rate cut between now and the end of the year, given inflation should remain muted.
Panelist insight: Credicorp Capital’s Luis Ortega said:
“We still expect the BCRP to continue cutting the reference rate throughout the year, and for it to close 2025 between 4.25%-4.50%, as we indicated in our Quarterly Report published in Dec-24. This is in a context of controlled inflation (inflation closed 2024 at the midpoint of the target range) and a still-negative output gap that continues to narrow.”
BBVA analysts said:
“At BBVA Research, we anticipate a final 25-basis-point cut to the policy rate in the coming months, before the end of the second quarter, bringing it to what we estimate as the neutral level (4.50% in nominal terms). We also maintain our view that the timing of the cut will depend largely on developments in financial markets.”