Peru Central Bank Holds Policy Rate at 4.50%

Peru’s Central Reserve Bank maintained its policy rate at 4.50 % at its 10 July meeting, judging the current stance appropriate as year-on-year headline and core inflation both held at 1.7 % in June—near the lower bound of the 1 %–3 % target range—while 12-month inflation expectations stayed at 2.3 %. After a 25 bp rate cut to 4.50 % in May, the Board has left the benchmark unchanged in June and July. The overnight deposit rate was kept at 2.50 %, and direct repos and monetary-regulation credits will continue at 5.00 % for the first 10 operations in the past three months, with higher rates possible for additional transactions at the discretion of the Monetary and Exchange Operations Committee. The Bank expects headline inflation to remain near the lower edge of the target in coming months before moving toward the midpoint, with core inflation seen around 2 % over the forecast horizon. Although most current-condition and expectation indicators of economic activity worsened in June, they largely remain in optimistic territory and output is assessed near potential. Externally, the Board highlighted a deterioration in global growth prospects and persistent financial-market volatility stemming from trade tensions, particularly in the United States. The Board reiterated that any future rate moves will depend on incoming data on inflation, expectations and activity and pledged to act as needed to keep inflation within the target band.