Itaú BBA - PERU – Monetary Policy Decision: BCRP remains on hold

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PERU – Monetary Policy Decision: BCRP remains on hold

April 12, 2019

April’s communique tone remained practically unchanged compared to last month statement

The Central Bank of Peru (BCRP) decided to keep the reference rate at 2.75% in April, in line with both our and market expectations (Bloomberg). The board expects annual inflation around the 2% central bank target. As in previous communication, the BCRP believes that it is appropriate to maintain an expansionary monetary policy as long as inflation expectations remain anchored in a context of below-potential economic activity growth.

April’s communique tone remained practically unchanged compared to last month statement. Non-primary economic activity still shows signs of dynamism. However, the central bank repeated that the level of output is still below potential. Regarding the external environment, the statement maintained a cautious stance on global economic activity, while observing less volatility in international markets (important for the Peruvian partially dollarized economy).

We expect the BCRP to deliver two 25-bp rate hikes in 4Q19. Given weaker growth in the core economies, the more accommodative stance of the Fed and well-behaved inflation, we think the central bank can afford to wait before removing its stimulus until it has more clarity on the economic outlook.
 

Julio Ruiz



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