Inflation in Peru may remain low in the first quarter of 2018 and might even fall below the target range's low limit (1%), private-run banking institution BCP projected Tuesday.
"While the baseline scenario considers the reference rate will remain at its current level of 3.25% in the coming months, BCR's expansion trend gains strength once again," BCP's weekly "Macroeconomy and Markets" report noted.
The financial institution estimated the Central Reserve Bank (BCR) could cut its reference rate again if inflation falls to 1%, if inflation expectations for the next 12 months (2.5% in November 2017) drop below 2%, and if any downside risk for Peruvian economy intensifies, meaning political noise or mismanagement of public investment.
Within this context, BCP reported that the recent evolution of these factors increases the chances of a cut in the reference rate during the first quarter of 2018.
Inflation 2017
As is known, Lima Metropolitan Area's consumer prices index experienced a 0.16% increase last December, following three consecutive months of decline.
Thus, Peru's 2017 annual inflation stood at 1.4% —below 2%, mid-point of BCR's target range— after seven years.