Peru’s BCRP To Continue Cutting Through Q1 2024

• As anticipated, the Banco Central de Reserva del Perù (BCRP - Central Bank of Peru) cut its policy interest rate from 6.75% to 6.50% on January 11.
• Headline inflation came down strongly once more to 3.2% y-o-y in December from 3.6% in November, with end-2023 data outpacing expectations.  Additionally, 12-month inflation expectations - which are closely tracked by the BCRP board - also eased from 3.2% in December to 2.8%, which is well within the target range and supports Fitch’s view for more cuts in Q1 2024.
• As inflation continues coming down strongly, another 25bps cut is expected in February.
• Fitch continues to expect that with real rates remaining very high and inflation expectations falling near the Banco Central de la Republica de Peru’s (BCRP) 3.0% target, the central bank will continue cutting through 2024, with the policy rate ending the year at 4.50%.

 (Source: Fitch Solutions)