Peru: Central Bank of Peru decreases rates in September
Latest bank decision: At its meeting on 12 September, the Central Bank of Peru (BCRP) decided to reduce the reference interest rate by 25 basis points to 5.25%, taking rate cuts since mid-2023 to 250 basis points.
Monetary policy drivers: The key domestic factors influencing the BCRP’s decision included both headline and core inflation that are currently tracking within the Bank’s 1.0-3.0% target range, a fall in 12-month inflation expectations, and the Bank’s belief that inflation will remain within-target going forward.
Policy outlook: The Central Bank suggested that future rate adjustments will be data-dependent. Most of our panelists see further rate cuts later this year 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:
“Today’s policy signals are consistent with our expectation that the MPC will hold at the next meeting. The base effects for headline inflation will turn adverse during Sep-Nov, and inflation will likely edge up transitorily. Given the still restrictive policy stance and overall benign inflation backdrop, we believe that the MPC stands ready to accommodate at least two more 25bp cuts during this cycle for a terminal rate of 4.75%. Our base case is that these cuts will be delivered in 2025.”
BBVA analysts were notably more dovish:
“At BBVA Research, we foresee two additional 25 basis point cuts to the reference rate during the remainder of the year. Considering that the Central Bank has explicitly stated it will return to a data-dependent mode, we condition our expectation of rate cuts on the absence of pressures in the foreign exchange market.”