Macchu Picchu Peru

Peru Monetary Policy July 2022

Peru: Central Bank raises rates in July

At its 7 July meeting, the Central Bank of Peru raised its key policy interest rate by 50 basis points to 6.00%, bringing total hikes this year to 350 basis points.

The hike was driven by a desire to rein in rising inflation and inflation expectations, both of which are well above the 1.0–3.0% target range. While the Bank sees price pressures easing from July, inflation is only expected to move back into the target range between Q2 2023 and Q3 2023.

The Bank stated that it was prepared to take additional steps going forward to ensure that inflation returns to target. In line with this, our panelists expect multiple additional rate hikes by the end of the year. However, tightening is likely to be less marked than in H1, as inflation is projected to decline in H2 and the Central Bank could become more wary about the impact on economic activity.

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