Peru | BCRP cuts the policy rate again in a context of marked decline in inflation

Summary

In its November decision, the Central Bank Board decided to reduce the reference rate to 7.00% but noted that this does not imply a cycle of successive interest rate cuts. The monetary policy position, understood as the real ex-ante reference rate, remains in restrictive territory.

Key points

• Key points:
• The policy rate now stands at 3.67% in real terms (September: 3.87%).
• The Bank noted that inflation has been showing a more marked downward trend since June, given that some of the transitory effects on inflation due to restrictions on the supply of certain foods are dissipating.
• The monetary authority maintained its inflation forecast: it expects it to get close to the target range (2% +/- 1%) by the end of the year and reach it in the first months of 2024.
• One year ahead inflation expectations decreased from 3.4% in September to 3.3% in October.
• We consider that, given the decreasing trend in inflation, the weakness of economic activity and the still restrictive monetary policy position, the possibility remains open that the Central Bank implements a new cut in the policy rate in December.

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