Peru: Central Bank unexpectedly cuts reference rate in November
November 7, 2013
At its 7 November monetary policy meeting, the Central Bank decided to cut the reference rate by 25 basis points to 4.00%. The decision, which caught the market by surprise, was the first change in the reference rate following 29 consecutive months at a rate of 4.25%. The Bank stated that the decision is preventive in nature and, "does not imply a sequence of reductions in the reference interest rate."
The Central Bank said that the Peruvian economy is experiencing a slowdown in economic activity, with output growing at a rate that is beneath its potential. The Bank also pointed to the global deceleration, which is affecting Peruvian exports. The monetary authority stated that inflation expectations are well anchored within the Bank's target range (1%-3%) and that the recent supply shocks that pushed consumer prices up are receding. The next meeting will take place on 12 December.
The cut in the reference rate was a surprise to the markets, thus the majority of LatinFocus Consensus Forecast panelists are taking the recent developments into account. As a result, the panel projects a reference rate of 4.21% at the end of this year. For 2014, panelists expect the monetary policy rate to end the year at 4.22%.