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Peru Monetary Policy April 2023

Peru: Central Bank stands pat in April; hikes possible ahead

At its 13 April meeting, the Central Bank of Peru kept its key policy interest rate unchanged at 7.75%.

The Bank decided to stand pat amid weaker economic dynamics and easing inflation. Headline inflation fell to 8.4% in March from February’s 8.7%. That said, disruptions to the supply of several food items due to a recent cyclone have put some unexpected upward pressure on inflation recently. Meanwhile, inflation expectations over the next 12 months remained unchanged at February’s 4.3% in March, well above the Bank’s target range of 1.0–3.0%.

That said, the Bank expects inflation to move back into the target range in the fourth quarter of 2023 amid lower international prices for food and energy, easing supply chain disruptions and decreasing inflation expectations. However, our panelists see inflation ending the year above target.

The Bank stated that April’s decision did not mean the end of the tightening cycle; it stands ready to resume hiking, depending on future inflation figures, the evolution of economic activity and the potentially prolonged impact of social turmoil following former President Pedro Castillo’s attempted coup in December.

The next meeting is scheduled for 11 May.

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