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Peru keeps policy rate at 4¼%, expects inflation to be 2% next year
By Angela McDaniels
Tacoma, Wash., Nov. 14 – The board of the Central Bank of Peru decided to maintain the monetary policy interest rate at 4¼%, according to a bank notice.
In the notice, the bank said the new rate is consistent with its forecast that inflation will gradually decline to 2% in 2017 and takes into account the following:
• The bank’s 12-month inflation expectations are within the target range;
• The effects of the rise in some food prices and fuel on the rate of inflation in September and October have been transitory;
• Local economic activity has been growing at a rate close to its potential growth level; and
• The global economy continues showing mixed signals of recovery in production and employment and increased uncertainty in international financial markets. In this scenario, the bank believes the Peruvian economy maintains sound fundamentals.
Inflation in October was 0.41%. As a result, the year-to-year rate of inflation rose to 3.41% in October from 3.13% in September. The bank said the monthly rate of inflation is due to an increase in the prices of some food products.
Inflation without food and energy was 0.12%, as a result of which the year-to-year rate of inflation declined to 3% in October from 3.01% in September.
The bank said that indicators of business expectations still show high levels and remain on the optimistic side. In line with this, GDP is expected to grow 3.8% in 2016 and 4.2% in 2017.
However, the indicators associated with construction and manufacturing have fallen in the past three months due to weakness of investment, the bank noted.
The board left the rate for overnight deposits at 3% and the rate for direct repos and rediscount operations at 4.8% for the first 15 operations carried out by a financial institution in the last 12 months.
The board will meet next on Dec. 15.
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