Peru: Central Bank keeps policy rate unchanged at its July meeting
At its 12 July monetary policy meeting, the Central Bank of Peru (BCRP) decided to keep the policy interest rate unchanged at an eight-year low of 2.75%, matching market expectations. It last cut the policy interest rate, by 25 basis points, in March, ending an easing cycle.
Strengthening economic activity and rising, albeit still moderate, inflation have reduced the need for further monetary easing and drove the Bank’s decision to hold the policy rate in July. Although inflation moved within the Central Bank’s target range of 1.0%–3.0% for the first time in four months in June, it remains low, restrained by a base effect due to supply disruptions last year owing to the coastal El Niño. Meanwhile, the economy likely gained further steam in the second quarter, following a strong acceleration in the first quarter. However, growth is expected to have remained below potential, thus not exerting strong upward pressure on prices.
The Bank’s communiqué stated that it will maintain the current expansionary stance until both inflation and inflation expectations converge to the midpoint of the target range. FocusEconomics panelists expect to see the monetary policy rate ending 2018 broadly unchanged, as the Bank continues to provide monetary stimulus to the economy. The next monetary policy meeting will be held on 9 August.