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Peru Monetary Policy August 2022

Peru: Central Bank raises rates again in August

At its 11 August meeting, the Central Bank of Peru raised its key policy interest rate by 50 basis points to 6.50%, bringing the cumulative increase for this year to 400 basis points.

The Bank continued to normalize its stance in order to rein in elevated inflation and inflation expectations. Both inflation and inflation expectations are well above the 1.0–3.0% target range, although they moderated slightly in July. The Bank sees inflation moving back into the target range in H2 2023.

The Bank stated that it was prepared to take additional steps going forward to ensure that inflation returned to target. Our panelists expect the tightening cycle to continue for the remainder of this year. However, it is likely to be considerably less marked than it has been to date: Inflation is projected to decline in H2 and the Central Bank could become more wary of the impact on economic activity.

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