Peru: Central Bank of Peru leaves rates unchanged in October
Latest bank decision: At its meeting on 10 October, the Central Bank of Peru decided to maintain the reference interest rate at 5.25%, following 250 basis points of rate cuts since mid-2023. This contrasted market expectations for a cut.
Monetary policy drivers: The decision to maintain the reference rate was likely driven by a desire to assess the impact of past easing on the economy, even though both headline and core inflation are within the Bank’s 1.0-3.0% target range. Moreover, the Bank was likely somewhat concerned over an expected uptick in inflation in Q4, plus the impact on prices of recent transport strikes.
Policy outlook: The Central Bank provided no explicit forward guidance on future interest rate movements. All of our panelists see further rate cuts later this year and more rate reductions in 2025, in line with projections for inflation to remain within the Bank’s 1.0-3.0% target range.
Panelist insight: On the outlook, Goldman Sachs’ Santiago Tellez said:
“The policy stance remains restrictive relative to an estimated real neutral rate of 2.1%, and we believe that the MPC will accommodate at least three more 25bp cuts during this cycle. Owing to the MPC’s manifest discomfort with the adverse base effects in Oct-Nov and potential short-term disruptions from the ongoing truckers’ protests, we believe that Dec may offer a viable window of opportunity to resume the cutting cycle.”