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Peru Monetary Policy May 2023

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

At its 11 May meeting, the Central Bank of Peru kept its key policy interest rate unchanged at 7.75% for the fourth consecutive time.

The Bank decided to stand pat amid weaker economic dynamics and easing inflation. Headline inflation fell to 8.0% in April from March’s 8.4%. Meanwhile, inflation expectations over the next 12 months dipped to 4.25% in April from March’s 4.30% but remained 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 May’s decision did not mean the end of the tightening cycle; it stands ready to resume hiking, depending on future inflation figures and the evolution of economic activity.

The next meeting is scheduled for 8 June.

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