Peru | BCRP expects inflation to remain above target for longer and hikes policy rate

Summary

The Board of the Central Bank decided to increase the monetary policy rate from 3.50% to 4.00% in March. The Bank now expects inflation to return to the target range in the first half of next year.

Key points

• Key points:
• The policy rate increased by 50 basis points for the seventh time in a row.
• The Bank reiterated that the higher inflation observed in February is a result of transitory supply factors such as the increase in the international price of food inputs and fuels, coupled with a higher exchange rate.
• The monetary authority modified its inflation forecast and now expects it to return to the target range (2% +/- 1%) in the first half of next year (previously: fourth quarter of this year).
• We expect the Central Bank to continue hiking, taking the reference rate to 5.00% before 1H22 ends given a more challenging inflation outlook.

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