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Peru Monetary Policy July 2019

Peru: Central Bank holds course at July meeting

At its monetary policy meeting on 11 July, the Central Bank of Peru (BCRP) kept the policy interest rate unchanged at an eight-year low of 2.75%, matching market expectations. It last cut the policy interest rate in March 2018, by 25 basis points, which ended an easing cycle.

Within-target inflation, well-anchored inflation expectations and flagging economic activity led the Bank to hold rates steady in July. Inflation came in at 2.3% in June, slowing from May’s 2.7% and remaining well within the Central Bank’s target range of 1.0%–3.0%. Meanwhile, public investment was extremely weak in H1, economic activity stalled in April following a subdued Q1, and business confidence dived in June. Therefore, growth most likely remained below potential in Q2, keeping inflationary pressures in check.

The Bank’s forward guidance stressed that the BCRP will keep checking both inflation and inflation expectations in order to modify its monetary stance, if deemed necessary to support the economy. FocusEconomics panelists expect the monetary policy rate to remain largely stable this year, due to modest inflation and moderate growth.

The next monetary policy meeting will be held on 8 August.

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