Peru | BCRP reduces the pace of monetary adjustment: is this the end of the hiking cycle?

Summary

The Board of the Central Bank decided to increase the monetary policy rate from 6.50% to 6.75% in September. The Bank tightened the monetary policy stance understood as the real ex-ante policy rate to a level slightly above neutral.

Key points

• Key points:
• The policy rate increased by 25 basis points and now stands at 1.65% in real terms (August: 1.34%).
• The Bank explained that the higher inflation observed in August is a result of the increase in the international price of food inputs and fuels.
• The monetary authority maintained its inflation forecast and expects it to return to the target range (2% +/- 1%) in the second semester of next year.
• Inflation expectations decreased from 5.2% to 5.1% in August.
• Given a position slightly above neutral, we consider that additional adjustments to the reference rate will be decided on a meeting-by-meeting basis and be highly dependent on the evolution of inflation and its expectations. However, we do not rule out any additional adjustment to the reference rate in the remainder of the year.

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