Central Bank of Peru leaves rates unchanged in July

At its meeting on 11 July, the Central Bank of Peru decided to maintain the reference interest rate at 5.75%. This followed 200 basis points of rate cuts since last August.

The decision to pause the easing cycle was likely driven by a desire to assess the impact of past rate cuts, and by signs of persistent price pressures: There was a slight increase in the headline inflation rate in June, and core inflation remained above the upper limit of the Bank’s 1.0-3.0% target range in the same month.

The Central Bank provided no explicit forward guidance on future interest rate movements. Virtually all our panelists see further rate cuts later this year in line with projections for headline inflation to remain within the Bank’s 1.0-3.0% target range.

On the outlook, Goldman Sachs’ analysts said: “We do not view the back-to-back holds as implying a durable floor for the policy rate. We anticipate that the MPC will accommodate further cuts in the remainder of the year at a quarterly pace of 25bp. There is room for further policy stance normalization, the overall inflation backdrop remains benign, and the inertia of some core components is likely to be temporary.”

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