Banco Central de Reserva del Perú will start raising its benchmark interest rate in the first quarter of 2019 due to the combination of a decline in public investment and an expanding output gap which it projects in the coming months, Gestión reported, citing a study by analysts at Banco de Crédito del Perú, or BCP.

The central bank on Nov. 9 maintained the policy rate at 2.75% but reportedly estimates that it will be forced to raise the rates in the first three months of 2019.

According to a survey conducted by the central bank, the financial sector and economists alike, all project the onset of a hike cycle in 2019, which will see the regulator increase the rate to 3.25% during the year.

Twelve-month inflation expectations stand at 2.44%, while analysts project inflation for 2018 at between 2.0% and 2.3% and at 2.5% in 2019.