Peru Monetary Policy May 2020

Peru

Peru: Central Bank leaves policy rate at record low in May

May 7, 2020

On 7 May, the Central Bank of Peru (BCRP) decided to keep the policy interest rate unchanged at 0.25%, a record low, after slashing it by 100 basis points at an extraordinary meeting in April.

Duel demand and supply-side economic shocks from the pandemic have drastically darkened Peru’s outlook, prompting to the Central Bank’s switch to an ultra-accommodative stance last month. In the accompanying statement, the BCRP highlighted that, on top of record-low interest rates, it was also implementing liquidity injections to provide additional support to the economy. The Bank has been conducting various operations including currency- and security-repurchase agreements, as well as injecting over PEN 25 billion in funds through the Reactiva Peru program, which have helped bring down interest rates.

Looking ahead, the BCRP left open the possibility of further easing, stating it “stands ready to extend monetary stimulus in different ways”. Moreover, inflation is expected to fall due to depressed demand, keeping space open for accommodative action.

The next monetary policy meeting is scheduled for 11 June.

The FocusEconomics panel sees the monetary policy rate ending 2020 at 0.67% and 2021 at 1.50%.


Author: Angela Bouzanis, Lead Economist

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