Peru Monetary Policy September 2018

Peru

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

September 18, 2018

At its 13 September 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 in March, by 25 basis points, which ended an easing cycle.

Subdued inflation, anchored inflation expectations and some signs of cooling in the economic recovery led the Bank to hold the policy rate unchanged in September. Following four consecutive months of acceleration inflation in August fell to 1.1%, close to the lower band of the Central Bank’s target range of 1.0%–3.0%. Meanwhile, GDP growth jumped in the second quarter, although the pace of expansion in economic activity softened throughout the quarter. High frequency data for the third quarter suggests the economy has continued to expand but likely 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 and economic growth approaches its potential. FocusEconomics panelists expect the monetary policy rate to end 2018 broadly unchanged as the Bank continues to provide monetary stimulus to the economy. The next monetary policy meeting will be held on 11 October.

Peru Interest Rate Forecast


FocusEconomics Consensus Forecast panelists see the monetary policy rate ending 2018 at 2.86%. For 2019, the panel projects a rate of 3.53% at the end of the year.


Author: Massimo Bassetti, Economist

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