Macchu Picchu Peru

Peru Monetary Policy May 2022

Peru: Central Bank raises rates for tenth consecutive time at May meeting

At its 12 May meeting, the Central Bank of Peru raised its key policy interest rate by 50 basis points from 4.50% to 5.00%, pushing it to its highest level since April 2009. The decision took the cumulative total of hikes since August 2021 to 475 basis points.

The raise reflected mounting concerns around escalating inflation in recent months—the annual rate hit 8.0% in April—driven largely by higher food and fuel prices. The Bank now excepts inflation to start declining in July as some upside drivers such as a relatively weak exchange rate and high commodity prices moderate, while the economy grows below potential, easing inflation to back within the 1.0–3.0% target range between Q2 2023 and Q3 2023.

Looking ahead, the Bank reiterated that it would “consider [if necessary] further adjustments to the monetary stance so that inflation returns to the target range over the forecast horizon”. As such, the majority of panelists see rates being raised further during the second quarter ahead.

The next monetary policy meeting is scheduled for 9 June.

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