Peru lifts policy rate to 4%; inflation forecast to reach target range

By Marisa Wong

Morgantown, W.Va., Jan. 15 – The board of the Central Reserve Bank of Peru decided to raise the monetary policy interest rate by 25 basis points to 4%, according to a bank notice.

In Friday’s notice, the bank said the new rate is compatible with the forecast that inflation will reach the target range in 2016 but takes into account the following:

• Inflation expectations are above the inflation target range;

• Inflation has been affected by temporary supply factors, such as the rise in the prices of some food products and utility rates, and by the depreciation of the sol against the dollar. The bank does not see the effect of these factors extending in a general manner to the rest of prices;

• Economic activity has been recovering gradually; and

• International indicators show mixed signals of global economic recovery and volatility in external financial markets and foreign exchange markets.

Inflation in November was 0.45%, the bank reported. As a result, the interannual rate of inflation rose to 4.4% in December from 4.17% in November. The bank said the monthly rate of inflation is explained by the increase in the prices of perishable food products and transportation rates.

Inflation without food and energy was 0.53%, as a result of which the interannual rate of inflation remained rose to 3.49% in December from 3.46% in November.

Recent indicators of economic activity and business and consumer expectations show an economic cycle with lower GDP growth rates than the potential output levels but with a faster pace of growth in the fourth quarter of 2015, according to the bank. The economy is foreseen to grow at rates similar to those of the potential output, the bank added.

The board also increased the rate for overnight deposits to 2¾%. The rate for direct repos and rediscount operations was increased to 4.55% for the first 15 operations carried out by a financial institution in the last 12 months. For swaps, the commission is equivalent to a minimum annual effective cost of 4.55%.

The board will meet next on Feb. 11.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.