Peru’s Central Bank raises its benchmark interest rate to 6.75%

Peru’s Central Reserve Bank (BCRP) board raised its benchmark interest rate by 25 basis points to 6.75%, in line with the normalization of the monetary policy stance, the issuing entity informed on Thursday.

To make this decision, the board considered that the twelve-month inflation rate decreased from 8.74% last July to 8.4% last August, still above the country’s target range “due to significant increases in international prices of food and fuel inputs”.

The BCRP added that the twelve-month non-food and energy inflation rate also dropped from 5.44% in July to 5.39% in August, also still above the upper limit of the inflation target range.

It also considers the significant increase in international energy and food prices since the second half of last year, accentuated by international conflicts.

It has led to “a strong increase in global inflation rates in magnitudes not seen in many years and to levels significantly higher than the inflation targets of central banks, both in advanced economies and the region,” said the issuing bank.

In this sense, twelve-month inflation expectations fell from 5.16% to 5.10% between July and August, still above the upper limit of the inflation target range.

Several leading indicators and expectations about the economy recovered in August, but most remained in the pessimistic range.

The BCRP considered that growth prospects for world economic activity for this and next year have declined due to the expected reversal of stimulus in advanced economies, international conflicts, and the persistence of bottlenecks in the global supply of goods and services, despite some improvement in recent months.

In this regard, the board assured that it is “particularly attentive” to new information regarding inflation and its determinants, including the evolution of inflation expectations and economic activity, to consider additional changes in the monetary policy stance.

In this sense, it reaffirmed its commitment to adopt the necessary actions to ensure the return of the country’s inflation to the target range within the projection horizon.

It informed that its next session, which was scheduled for October 6, would reevaluate the monetary program.

With information from EFE

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