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BCP believes Peruvian central bank will raise rates in Q1'19

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BCP believes Peruvian central bank will raise rates in Q1'19

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.