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Our end-of-year policy rate forecast stands at 6.75%.
2023/10/06 | Andrés Pérez M. & Julio Ruiz

In its October meeting, the Central Bank of Peru (BCRP) cut its policy rate for the second consecutive month by 25-bp to 7.25%, in line with our forecast and market expectations (as per Bloomberg). As the previous communication, the statement emphasized that the decision does not necessarily imply further consecutive rate cuts. Future rate adjustments will be dependent on inflation and its determinants.   


The central bank expects annual inflation to reach the ceiling of the 1-3% inflation target at the beginning of next year, although it noted upside risks to inflation associated to harsh weather conditions (referring to the El Niño phenomenon).  On the other hand, the statement mentioned social conflicts and El Niño phenomenon had a larger than expected impact on internal demand, also noting a deterioration in September’s leading activity indicators. Analysts surveyed by the BCRP expected one-year ahead inflation at 3.4%, taking the real ex-ante policy rate to 3.9%, still above the neutral real rate of 1.5%.


Our end-of-year policy rate forecast stands at 6.75%. We expect lower inflation and weak activity to lead the BCRP to maintain its pace of policy rate cuts of 25 bps at the last two meetings of the year.