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Peru Monetary Policy September 2023

Peru: Central Bank cuts rates in September

At its 14 September meeting, the Central Bank of Peru (BCRP) cut its key policy interest rate to 7.50% from 7.75%, where it had been since January.

The decision to cut was driven by declining headline inflation, core inflation and market inflation expectations, and by the Bank’s view that price pressures would continue to trend downward ahead. Moreover, economic indicators remaining mildly pessimistic and hinting at a weak recovery for the economy ahead were a further driver for reducing the policy interest rate.

The Bank did not give explicit forward guidance in its press release. However, it stated that the decision to cut did not necessarily imply that a cycle of successive interest rate reductions was ahead. Moreover, it added that future adjustments to the reference rate would be conditional on new information on inflation and its determinants.

Most of our panelists see further rate cuts by year-end in line with an expected ongoing decline in inflation. The next monetary policy meeting is scheduled for 5 October.

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