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Peru Monetary Policy June 2019

Peru: Central Bank stands pat at June meeting

At its monetary policy meeting on 13 June, 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.

Unremarkable inflation, well-anchored inflation expectations and weakening and below-potential economic activity led the Bank to hold rates in June. Inflation came in at 2.7% in May, inching up from April’s 2.6% but remaining within the Central Bank’s target range of 1.0%–3.0% nevertheless. Meanwhile, GDP growth cooled significantly in Q1, weighed down by a sharp slowdown in fixed investment, while softening credit growth, lower business confidence and cooling public investment seem to be restraining activity in Q2. Following Q1’s slowdown, growth most likely remained below potential in Q2, with inflationary pressures consequently contained.

The Bank’s forward guidance was unchanged, reemphasizing that the BCRP will stand pat as long as both inflation and inflation expectations remain within the target range and until economic growth approaches its potential. FocusEconomics panelists expect the monetary policy rate to increase only gradually this year, as growth firms up and inflation gains speed.

The next monetary policy meeting will be held on 11 July.

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