At its July 7 meeting, the Central Bank of Peru raised its key interest rate by 50 basis points to 6.00%, bringing the total increase to 350 basis points this year.
The increase was driven by a desire to curb rising inflation and inflation expectations, which are well above the target range of 1.0-3.0%. While the Bank has seen a reduction in price pressures since July, inflation is only expected to return to the target range between Q2 2023 and Q3 2023.
The bank said it was ready to take additional steps to ensure that inflation returned to the target level. Accordingly, our experts expect multiple rate hikes by the end of the year. However, the tightening is likely to be less pronounced than in the first half of the year, as inflation is forecast to decrease in the second half of the year and the Central Bank may become more cautious about the impact on economic activity.