JM7 - Peru | Central Bank maintains course, hiking the policy rate by 50bp again

Summary

The Board of the Central Bank decided to increase the monetary policy rate from 1,50% to 2,00% in November. In this manner, the Bank gradually reduces the expansive stance of monetary policy given unanchored inflation expectations.

Key points

• Key points:
• The Bank argued that the higher inflation observed in October is a result of transitory supply factors such as the increase in the international price of food inputs and fuels, coupled with a higher exchange rate.
• The monetary authority stated that it expects inflation to return to the target range (2% +/- 1%) in the second half of next year.
• Looking forward, the Central Bank seems to consider that further monetary tightening is required, and economic activity would provide the necessary space, but maybe it will moderate the pace of adjustment due to a break we expect in the recent inflationary trend that would soothe expectations as well.

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