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Peru Monetary Policy January 2019

Peru: Central Bank stands pat at first meeting in 2019

At its monetary policy meeting on 10 January, the Central Bank of Peru (BCRP) kept 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 2018, by 25 basis points, which ended an easing cycle.

Within-range inflation, anchored inflation expectations and firming but still below-potential economic activity led the Bank to hold the policy rate unchanged in January. Inflation came in at 2.2% in December, matching November’s result and comfortably remaining within the Central Bank’s target range of 1.0%–3.0%. Meanwhile, economic activity accelerated in October, while both business and consumer confidence strengthened in November and December. This indicates the economy gained traction in the final quarter, although the pace of expansion likely remained 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 remain within the target range and economic growth approaches its potential. FocusEconomics panelists expect the monetary policy rate to increase moderately this year, as the Bank tightens its monetary stance due to growth approaching its potential and as inflation picks up. The next monetary policy meeting will be held on 7 February.

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