MNI BCRP Preview – Feb 2025: Cautious Pause Seen, Risk Of Cut

Executive Summary

• The BCRP will be encouraged by the latest set of inflation data in Peru, which showed annual headline CPI fall further below target, keeping the door open to another 25bp rate cut this week.
• However, the explicit mention to the reference rate “approaching the level estimated as neutral”, a more hawkish Fed and prominent external risks relating to global trade may prompt a cautious hold at this juncture.

Click to view the full preview: MNI BCRP Preview - February 2025.pdf

Speaking at the World Economic Forum in Davos last month, BCRP Governor Julio Velarde sounded relaxed about the inflation outlook, saying that he expects the headline rate to fall to 1% by the end of March, before picking up again to close the year at around the 2% target. Over a longer timeframe, the central bank said in last month’s policy statement that it expected both the headline and core measures to remain within the target range over the forecast horizon. However, the central bank also said that activity is still around potential as it noted that the policy rate is now approaching its neutral level.