Peru | The Central Bank will keep a highly expansive policy stance for a prolonged period

Summary

The Board of the Central Bank decided to maintain the monetary policy rate at 0,25% in May. The accompanying statement included a “forward guidance” component, with the Bank committing to the current monetary policy stance as long as the negative effects of COVID-19 persist.

Key points

• Key points:
• The monetary authority also emphasized the various measures adopted to provide liquidity and maintain the payments chain unbroken such as longer term repo operations (up to 3 years) and the new funds being auctioned under the “Reactiva Peru” program (currently PEN 25,4 billion so far).
• Our baseline scenario contemplates the monetary policy rate remaining at this level at least until the end of 2021, given the expected impact of the coronavirus crisis on economic activity.
• We also find it probable that the “Reactiva Peru” Program will be extended and do not rule out other unconventional monetary policy measures.

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