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Peru Monetary Policy November 2018

Peru: Central Bank keeps policy rate unchanged at its November meeting

At its 8 November monetary policy meeting, the Central Bank of Peru (BCRP) kept the policy interest rate unchanged at an over eight-year low of 2.75%, matching market expectations. It last cut the policy interest rate in March, by 25 basis points, which ended an easing cycle.

Moderate, albeit rising, inflation; well-anchored inflation expectations; and some cooling in economic activity were behind the Bank’s decision to hold the policy rate unchanged in November. Inflation hit 1.8% in October, accelerating for the second consecutive month (September: 1.1%). That said, it remained well within the Central Bank’s target range of 1.0%–3.0%. Moreover, after a jump in GDP growth in the second quarter, the pace of expansion in economic activity was quite moderate in the first two months of the third quarter. This suggests the economy has continued to expand below potential, thus not exerting strong upward pressure on prices.

The Bank stated that it will maintain the current expansionary stance until both inflation and inflation expectations converge to the midpoint of the target range and economic growth approaches its potential. FocusEconomics panelists expect the Bank to start a gradual tightening of its monetary policy stance next year. The next monetary policy meeting is scheduled for 13 December.

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