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Peru: Central Bank of Peru decreases rates in May
Latest bank decision: At its meeting on 8 May, the Central Bank of Peru (BCRP) decided to reduce the reference interest rate by 25 basis points to 4.50%. This took rate cuts since mid-2023 to 325 basis points.
Mild price pressures enable cut: The key factors influencing the BCRP’s decision were inflation comfortably within the Bank’s 1.0-3.0% target range, expectations for inflation to remain in target ahead, and a recent deterioration in economic activity expectations.
Further easing is a possibility: Forward guidance was open-ended. Many of our panelists see the Bank on hold for the rest of the year, though some see scope for 25 to 75 basis points of extra cuts.
Panelist insight: On the outlook, Goldman Sachs’ Santiago Tellez said:
“Our interpretation of the meeting’s signals has clear dovish implications for our views. We now see the MPC as very much open to delivering at least one more rate 25bp cut, bringing the policy stance slightly below neutrality. While we still believe that the MPC would prefer for further clarity on the Fed funds rate path given the now broadly closed rate differential, the benign domestic inflation backdrop endows it with room to deliver insurance cuts.”
