MNI Peru Central Bank Preview – July 2024: BCRP Expected to Extend Pause
Most analysts are expecting the BCRP committee to extend its pause in the easing cycle, holding the reference rate at 5.75%.
Executive Summary
- The most likely outcome of the July BCRP meeting is for the committee to extend its pause in the easing cycle, holding the reference rate at 5.75%.
- The persistence of core inflation above the upper bound of the target range should help to maintain the committee's cautious stance.
- Furthermore, recent strength for domestic economic activity and a cautious Fed should bolster the likelihood of another hold at this juncture, while leaving the door open to resume easing later this year.
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MNI Peru Central Bank Preview - July 2024.pdf
Consumer prices rose by a slightly-larger-than-expected 0.12% m/m in June, which was enough to lift the headline rate of inflation to 2.3% y/y, from 2.0%. Excluding food and energy, the price index rose by 0.2% m/m, with transport, hospitality and miscellaneous goods and services the main drivers. The annual core CPI inflation rate stood at 3.1%, little changed from May, and still above the ceiling of the 2.0% +/- 1 target, while services inflation remained at 3.5%.
Given the emphasis the BCRP has placed on core inflation, holding rates last month even as headline inflation returned to the 2% target, the stickiness of core inflation may be enough to persuade it to extend the pause for another month. As a reminder, the June statement continued to sound comfortable with the inflation outlook, but noted some persistence in core inflation, which along with recent exchange rate pressures, helped to explain the pause.