Peru keeps its interest rate at 7.75% for the fifth consecutive time

By Paola Villar S.

Peru continues to stand out from the regional trend: although it keeps the door open to its monetary upward cycle, the Board of the Central Reserve Bank of Peru (BCR) decided to keep the benchmark interest rate at 7.75% for the fifth consecutive time, in line with analysts’ expectations, while there’s a possibility of cuts in the coming months.

“This decision does not necessarily imply the end of the interest rate hike cycle. Future adjustments in the reference rate will be conditioned to new information on inflation and its determinants,” reiterated the BCR Board of Directors in its statement.

Among the factors to make its decision, the Central Bank Board remarked that it considered the monthly inflation rate in April, which was 0.56%, and inflation without food and energy, which stood at 0.20%.

Peru registered a year-on-year inflation rate of 7.97% in April, leaving behind the ceiling of 8%, while the twelve-month non-food and energy inflation rate decreased from 5.92% in March to 5.66% in April.

Both indicators were above the upper limit of the inflation target range, which stands at 3%.

“A downward trend in year-on-year inflation is projected to continue in the coming months with a return to the target range in the fourth quarter of this year due to the moderation of the effect of international food and energy prices, the reversal of supply shocks in the agricultural sector and a reduction in inflation expectations for the rest of 2023,” the BCR board of directors said.

The authorities of the monetary entity said they are particularly attentive to new information regarding inflation and its determinants, “including the evolution of inflation expectations and economic activity to consider, if necessary, modifications in the monetary policy stance.”

With information from Bloomberg

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