Peru | Unexpectedly, the central bank cut the policy rate in January

The CB surprised the market consensus and lowered its policy rate by 25bp, to 3.25%. The weak output print for November, released only hours before the policy meeting, suggested the need for a demand stimulus. An increased confidence in that inflation will soon fall back into the target range and converge towards the middle of the range in the coming months, and somewhat lower depreciation pressures on the local currency, left some room for the rate cut. Going forward, monetary policy decisions will be very data-dependent, especially on FX volatility in the days preceding the meeting. However, we have a downward bias, especially for the first few months of 2015, as we expect output to remain weak in the short-term, something which preliminary economic activity indicators for December support, and inflation to trend down from now on, soon approaching the centre of the target range.

Authors

Geographies

Topics