Central Bank of Peru leaves rates unchanged in June

Central Bank stands pat as expected: At its meeting on 12 June, the Central Bank of Peru (BCRP) decided to maintain the reference interest rate at 4.50%, following a surprise rate cut at the previous meeting in May. The decision paused the easing cycle that delivered a cumulative 325 basis points of cuts since mid-2023. This move was in line with market expectations, which expected the BCRP to stay put and evaluate the impact of the significant monetary easing over the past months.

Central Bank holds steady as inflation cools, global risks loom: The BCRP opted to stand pat as price pressures remained within the 1.0–3.0% target in May and the inflation outlook remained favorable. Forward-looking inflation expectations over the next year were unmoved at 2.3%, squarely within the policy band. Moreover, despite losing slight momentum in May, economic activity remained broadly aligned with potential. Still, the Bank flagged rising global trade tensions and financial market turbulence: Mounting external risks could complicate the path to price stability, even as domestic indicators continue to tread stable ground.

Easing cycle close to an end: The Central Bank provided no explicit forward guidance on future interest rate moves. Roughly half of our panelists expect the BCRP to hold steady through the end of 2025, while others anticipate rate cuts ranging from 25 to 75 basis points. That said, the number of panelists expecting the Bank to stand pat has increased in recent months, suggesting the monetary easing cycle may be nearing its end. U.S. trade policy remains a key factor to watch.

Panelist insight: On the outlook, Goldman Sachs’ Santiago Tellez said: “We are adding one final 25bp rate cut to 4.25% to our baseline […]. Our base case is that this cut will be delivered in September, but we have less conviction on the timing, which will likely be constrained by the external environment. The closed output gap and a near-zero interest rate differential provide the central bank with policy flexibility, as there is less immediate pressure to address either inflationary pressures or stimulate economic growth.”

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