Peru: Central Bank of Peru leaves rates unchanged in March
Central Bank holds steady: At its meeting on 12 March, the Central Bank of Peru (BNRP) decided to maintain the policy interest rate at 4.25%. The hold was in line with market expectations.
Rising global risks and temporary domestic pressures reinforce neutral stance: The decision to hold reflects a cautious approach as inflation is expected to temporarily move towards the upper band of the target range in the coming months due to weather-related factors, higher international energy prices and natural gas supply disruptions. While economic activity remains near its potential, heightened international uncertainty—driven by Middle East conflicts and oil price volatility—further justified the hold.
The Central Bank provided no explicit forward guidance on future interest rate moves. Some of our panelists expect the Central Bank to cut rates slightly this year, though several see the Bank on hold. The BNRP will reconvene on 9 April.
Panelist insight: “We maintain our forecast that the policy rate will remain at 4.25% for the foreseeable future, but we now assign equal odds to the possibility that the next move will be a hike or a cut (vs. risks skewed towards a residual 25bp cut previously). With a closed output gap and well anchored inflation expectation, we see no reason for the policy rate to move. We expect the MPC to remain mindful about the duration of the global energy shock, along with its interaction with the sizable domestic gas supply disruptions (Peru is a net-energy importer).”