Central Bank of Peru leaves rates unchanged in April

Latest bank decision: At its meeting on 10 April, the Central Bank of Peru (BCRP) decided to maintain the reference interest rate at 4.75%.

Monetary policy drivers: The BCRP likely decided to stay put to evaluate the impact of the significant monetary easing over the last 18 months, and in light of elevated external uncertainty amid a brewing global trade war. Moreover, with inflation comfortably within the Bank’s 1.0-3.0% target range and the domestic economy performing well, there was no pressure to change rates in either direction.

Rate cuts expected to resume: Forward guidance was open-ended. Almost all of our panelists see further rate cuts between now and end-2025, with forecasts ranging from 25 to 125 basis points of cuts.

Panelist insight: On the outlook, Goldman Sachs’ Santiago Tellez said: “We remain comfortable with our view that the MPC will deliver at least another 25bp cut to 4.5% in Q2 considering the benign inflation outlook. That said, we are now more open to the possibility of further preemptive easing in H2 ahead of the potential deterioration activity, due to the increasing sensitivity of Peru’s growth outlook to global conditions. The materialization of these cuts may be constrained by the volatile external backdrop.”

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