Peru | Policy rate remains on hold in May; for how much longer?

The Central Bank Board (BCRP) decided to maintain in May the monetary policy rate at 7,75%, a decision that was widely expected.

Key points

• Key points:
• This decision implies that in real terms the policy rate stands at 3,50% (April: 3,45%), a restrictive stance.
• There were no relevant changes in the statement that was released. It keeps suggesting that future rate movements are data-dependent.
• According to recent remarks from its president, only when the central bank feels that both the inflation forecast and inflation expectations have gone down sufficiently, rate cuts will begin.
• In our base scenario inflation will still be far above the central bank’s target in the short-term. A rate cut process starting very soon is thus unlikely.
• We keep expecting that this rate cut process will begin in the fourth quarter, when we believe inflation will be closer to the target range and clearly trending downwards, and that it will be gradual.

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