Peru: Central Bank holds fire in September
September 12, 2019
At its monetary policy meeting on 12 September, the Central Bank of Peru (BCRP) kept the policy interest rate unchanged at a nine-year low of 2.50%, following August’s 25 basis point cut. The decision matched LatinFocus analysts’ expectations.
Well within target inflation and inflation expectations, and some signs of recovery in economic activity at the outset of Q3 prompted the Bank to hold its ground in September. Inflation inched down to 2.0% in August (July: 2.1%), thus hitting the mid-point of the Central Bank’s target range of 1.0%–3.0%. Meanwhile, consumer confidence ticked up in July, and the pace of credit growth remained robust in the same month. That said, business sentiment weakened in the first two months of the quarter and public investment underperformed in the January–August period.
In its forward guidance, the Bank remarked that monetary policy has to remain expansionary, and stated further cuts could be necessary going forward. Under current conditions, inflation is expected to trend near the mid-point of the target range, although sustained weakness in domestic demand could dent price pressures going forward.
The next monetary policy meeting will be held on 10 October.