Peru | BCRP maintains rate and increases inflation forecast with no sign of rate cuts soon

Summary

The Board of the Central Bank decided to maintain the monetary policy rate at 7.75% in June. The Bank maintained the monetary policy stance understood as the real ex-ante policy rate at a restrictive level and revised its inflation forecast slightly upward.

Key points

• Key points:
• The policy rate now stands at 3.54% in real terms (April: 3.50%).
• The Bank remarked that inflation has been affected recently by food supply restrictions in a transitory manner.
• The monetary authority changed its inflation forecast slightly: it now expects it to get close to the target range (2% +/- 1%) by the end of the year; previously it expected inflation to return to the target range in the fourth quarter.
• One year ahead inflation expectations decreased from 4.3% in April to 4.2% in May, while those for the end of 2023 remained at 4.9%.
• We believe that the monetary pause will probably continue in the following months, even though the Central Bank still does not rule out future rate hikes on its announcement.

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