Is this President Boluarte’s last dance? Economy grew sluggishly in Q2; PEN/USD appreciation justifies one 25 bp rate cut in the next nine months
In this report we offer an update on Peru’s political, economic and market developments. We first discuss politics and the likelihood of President Dina Boluarte’s facing a successful impeachment before her term ends on July 28th, 2026. Although we continue to ascribe a 45% probability to Boluarte’s impeachment, much depends on what happens when the president enters the last year of her term, on July 29th.
We then move on to the economy, and offer an update on recent economic performance using high-frequency economic reports. We argue that recent economic performance aligns well with our out-of-consensus forecast, anticipating a deceleration in the previous and current quarters, converging with our 2.7% y/y full-year 2025 growth forecast.
Finally we turn to the markets, and discuss the recent PEN/USD appreciation. We argue that the stars have aligned to strengthen the local currency. But we have decided to keep unchanged our projection that PEN/USD will reach PEN3.7/USD1 by yearend, induced by political risk. One side effect of the strong currency is a lower year-end headline inflation forecast, which we have revised down to 2% from 2.2%. We argue that this opens the door for the Banco Central de Reserva del Perú’s Board to deliver a 25 bp rate cut in the next nine months.
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