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Peru Monetary Policy June 2024

Peru: Central Bank of Peru maintains rates in June

At its meeting in June, the Central Bank of Peru (BCRP) decided to maintain the reference interest rate at 5.75%. This followed 200 basis points of cuts since last December, and contradicted analysts’ expectations of another cut.

The decision to maintain the reference rate was likely influenced by a desire to assess the impact of past monetary easing before making any further rate cuts, as well as by recent FX volatility in the Latin American region.

The Central Bank provided no specific forward guidance on interest rates; it reiterated that future adjustments to the reference rate would be conditional on new information relating to inflation and its determinants. Most of our panelists see further rate cuts later this year in line with projections for inflation to remain within the Bank’s 1.0-3.0% target range.

On the decision and outlook, Goldman Sachs’ analysts said:

“In all, we view the hawkish hold as a change in the pace of cutting, but not necessarily as a durable floor for the policy rate. Although this move surprised the market (and our) expectation, it is consistent with the prudent tone of the present cutting cycle. We believe that the ongoing bout of exchange rate volatility in the region. […] For now, we maintain our expectation of additional 25bp cuts per quarter in 2H2024.”

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