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PERU: BCRP On Hold At 4.75%, As Expected, Remains Data Dependent

PERU
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  • The BCRP left its reference rate unchanged at 4.75% last night, in line with the majority of analyst expectations. A minority of analysts had expected a further 25bp cut. In the accompanying statement the Board indicated that it remains in a data dependent mode, without committing to any particular future action. However, the Board dropped the reference to the policy rate approaching its neutral level.
  • On inflation, the Board explained the drop in January on the gradual normalisation of supply conditions for some food products and seasonal factors. Going forward, it expects headline inflation to fall towards the bottom of the target range in the coming months, before eventually returning to around target. Core inflation is seen falling further towards target. On activity, the majority of indicators are still within “optimistic” territory, although indicators have shown “higher growth” recently.
  • In terms of the outlook, the statement notes the risks stemming from uncertainty about global trade policies. Overall, the committee reiterates that future rate adjustments will depend on new information about inflation, particularly core inflation, inflation expectations and economic activity. Analysts see scope for one to two additional 25bp cuts in the meetings ahead to a neutral level, although some don’t see further easing until H2. The next MPC meeting is on March 13.
    • Link to BCRP policy statement here.
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  • The BCRP left its reference rate unchanged at 4.75% last night, in line with the majority of analyst expectations. A minority of analysts had expected a further 25bp cut. In the accompanying statement the Board indicated that it remains in a data dependent mode, without committing to any particular future action. However, the Board dropped the reference to the policy rate approaching its neutral level.
  • On inflation, the Board explained the drop in January on the gradual normalisation of supply conditions for some food products and seasonal factors. Going forward, it expects headline inflation to fall towards the bottom of the target range in the coming months, before eventually returning to around target. Core inflation is seen falling further towards target. On activity, the majority of indicators are still within “optimistic” territory, although indicators have shown “higher growth” recently.
  • In terms of the outlook, the statement notes the risks stemming from uncertainty about global trade policies. Overall, the committee reiterates that future rate adjustments will depend on new information about inflation, particularly core inflation, inflation expectations and economic activity. Analysts see scope for one to two additional 25bp cuts in the meetings ahead to a neutral level, although some don’t see further easing until H2. The next MPC meeting is on March 13.
    • Link to BCRP policy statement here.