Central Bank of Peru decreases rates in November

Latest bank decision: At its meeting on 7 November, the Central Bank of Peru (BCRP) decided to lower the reference interest rate by 25 basis points to 5.00%, taking rate cuts since mid-2023 to 275 basis points.

Monetary policy drivers: The key domestic factors influencing the decision were included headline inflation, core inflation, market inflation expectations and the Bank’s own inflation forecasts all currently tracking within the BCRP’s 1.0-3.0% target range.

Policy outlook: Forward guidance was open-ended, though the Bank suggested it was nearing the neutral interest rate—pointing to only mild monetary easing going forward. All of our panelists see further rate cuts between now and end-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: “We believe that the MPC is now in the fine-tuning stage of the cutting cycle and is in no rush to deliver further cuts in the near term. Given an estimated real neutral rate of 2.0%, our expectation of a favorable inflation backdrop, and the hint that the policy stance is not yet in neutral territory, we believe it will accommodate two more 25bp cuts in 2025 (once per quarter) for a terminal rate of 4.5%.” BBVA analysts said: “At BBVA Research, we foresee two additional 25 basis point cuts to the reference rate in the following months. 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.”

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Peruvian interest rate projections for the next ten years from a panel of 26 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable interest rate forecast available for Peruvian interest rate.

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