2026 elections rising to the fore; economy accelerated at end-2024; BCRP to end its easing cycle
We discuss three topics in this report. First, we argue that politics is changing gears, with the focus turning to the 2026 election campaign. Second, we discuss economic performance. We suggest that, although the economy accelerated through November, economic cooling began in December, and we expect that to continue through 2025. Finally, on monetary policy, we argue that, while the Banco Central de Reserva del Perú (BCRP, the central bank) Board cut its interest rate by 25 bp in January 2025, it is close to ending its easing cycle. Our forecast projects one more 25 bp cut in 2025, with a year-end rate of 4.5%.
In previous reports, we have argued that political drivers would switch gear sometime in 2025. Until now, the political spotlight has been on the chronic unpopularity of President Dina Boluarte, and on the investigations into her, her family and her supporters by the Minsterio Público, Fiscalía de la Nación (MPFN, the Attorney General’s Office). However, as we approach the 2026 elections, the electoral campaign will take precedence. Signs of this dynamic coming into play emerged last week.
Most recent high-frequency reports suggest that the economy accelerated at the end of 2024. On January 15th the Instituto Nacional de Estadística e Informática (INEI, the National Statistical Institute) released its November GDP estimate, confirming that growth advanced 3.9% relative to the same month of 2023, up from 3.8% in October and 3.2% in September. Economic performance has also been impressive on the 3-month-on-3-month seasonally adjusted at annual rates measure, reaching 5.2% in November, after 4.8% in October and 3.4% in September.
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