MNI Peru CB Preview – Aug 2025: Further Hold Seen, Risk Of Cut

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Executive Summary

• The BCRP is expected to keep the benchmark rate on hold at 4.50% for a third consecutive meeting in August, although risks remain skewed towards the possibility of a renewed cut given the benign inflation backdrop.
• Forward guidance will likely keep the door open for more accommodation given that headline inflation is below the midpoint of the central bank’s target, but policymakers are expected to reiterate that future decisions will remain data-dependent.

The monetary policy committee has maintained its data dependent stance while remaining on hold at recent meetings, keeping the door open to further easing ahead, if necessary. In July, the Board continued to sound cautious about the external backdrop, highlighting the downside risks to global growth due to ongoing trade uncertainties. Despite the increase in inflation expectations in several major economies, however, domestic inflation expectations remained stable within the target range, while domestic growth is still around its potential level. Against this backdrop, the Board continues to expect headline inflation to remain in the lower half of the target range in the coming months, before settling around the 2% target, while core inflation is seen holding around 2%.

Latest data since that meeting have remained consistent with that outlook. In July, headline consumer prices rose by just 0.23% m/m, keeping annual inflation unchanged at 1.69% y/y, in the lower half of the 1-3% target range for an eighth consecutive month. While inflation is expected to edge up through the second half of the year, it looks set to end the year close to target. Importantly, inflation expectations remain well anchored, with analysts’ one-year ahead expectations falling to a four-year low of 2.19% in July, down from 2.28% previously.