MNI Peru CB Preview – Jun '26: Hold Seen, But Low Bar to Hike

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Executive Summary

• The BCRP is expected to leave its benchmark reference rate unchanged at 4.25% on Thursday, although the decision may be a close call following the surge of inflation since March and robust Q1 GDP data.
• While headline CPI inflation came in below expectations in May, core inflation rose to a fresh three-year high and inflation expectations continued to edge up, keeping the door open to a potential hike in the near future.
• Nonetheless, uncertainty over the presidential election outcome may prompt the central bank to remain cautious at this juncture, especially with the PEN rebounding towards multi-year highs against the US dollar.

While the macro data may support the case for a rate hike, uncertainty over the political backdrop could prompt the BCRP to stay cautious for now. With 97.0% of ballots counted, the presidential election run-off remains neck-and-neck, with left-wing candidate Roberto Sanchez (50.075% of the vote) still holding a razor-thin lead over right-wing candidate Keiko Fujimori (49.925%). Despite Sanchez overtaking Fujimori, political betting markets have continued to show Fujimori's probability of winning rising, with data from Polymarket giving her a 96% implied probability of victory. This appears to be driven by expectations that she will win a significantly larger share of overseas ballots, most of which are yet to be counted. 

Optimism that Fujimori remains on course to win has driven a sharp rebound in local assets this week, after an initial post-election sell-off, propelling PEN back to multi-year highs against the dollar and prompting the BCRP to resume FX intervention on Tuesday. Against this backdrop, the central bank may be reluctant to hike rates at this juncture and potentially provide more fuel to the FX rally.