Central Bank of Peru cuts rates in September

Central Bank reduces rates: At its 11 September meeting, the Central Bank of Peru (BCRP) decided to cut the reference interest rate from 4.50% to 4.25%. This followed 325 basis points of cuts from late 2023 to May this year.

Mild inflation underpins move: Inflation hit a seven year low in August and was near the lower bound of the Central Bank’s 1.0–3.0% target band, with the BCRP expecting inflation to remain comfortably inside the band going forward; mild price pressures provided scope for more monetary easing to aid economic activity.

Easing cycle close to an end: The Central Bank provided no explicit forward guidance on future interest rate moves. The majority of our panelists see the Bank standing pat through year-end, before easing its policy rate by 25 basis points in 2026.

Panelist insight: On the outlook, Goldman Sachs’ Santiago Tellez said: “We see the policy rate at 4.25% for the foreseeable future. With a largely closed output gap, well-anchored inflation expectations, and only a marginally restrictive policy stance, there is limited urgency to either address inflationary pressures or stimulate economic growth. We do not foresee the need for easing that would bring the policy rate below neutrality, but we remain open to such a scenario should domestic activity weaken more than anticipated, or should the political dynamics and business sentiment deteriorate as we approach the 2026 Presidential elections.”

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