Peru | BCRP hikes policy rate to 7,50% but tightening cycle could continue

Summary

The Board of the Central Bank decided to increase the monetary policy rate from 7.25% to 7.50% in December. The Bank tightened the monetary policy stance understood as the real ex-ante policy rate to a slightly more restrictive level.

Key points

• Key points:
• The policy rate increased by 25 basis points again and now stands at 2.82% in real terms (November: 2.47%).
• The Bank explained that the higher inflation observed in November is a result of the increase in the international price of food inputs and fuels.
• The monetary authority revised its inflation forecast and now expects it to return to the target range (2% +/- 1%) in the fourth quarter of next year.
• One year ahead inflation expectations decreased from 4.8% to 4.7% in November but those for the end of 2023 increased from 4,2% to 4,4%.
• We maintain that additional adjustments to the reference rate will be decided on a meeting-by-meeting basis and be highly dependent on the speed of descent of inflation and its expectations. We do not rule out any additional adjustment to the reference rate.

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