Peruvian Central Bank maintains benchmark interest rate at 0.25%

RIO DE JANEIRO, BRAZIL – The Board of Directors of the Central Reserve Bank of Peru (BCR) decided to continue its expansionary monetary policy, maintaining the benchmark interest rate at 0.25% and implementing further liquidity injection operations.

Year-on-year inflation increased from 2.0% in December to 2.7% in January due to specific supply factors that led to higher prices of some goods and energy.

Likewise, it indicated that trend inflation remains in the lower part of the target range. “Thus, year-on-year core inflation was 1.7% in January at the center of the target,” the BCR pointed out.

The Central Bank estimated that inflation will remain within the target range throughout 2021 and 2022, and it will lie at the lower part of the range by the end of the year, as economic activity will remain below its potential level over the forecast horizon (2021-2022). One-year ahead expected inflation was 2.0% in January.

Economic activity

On the other hand, it indicated that the recovery of leading indicators moderated in January.

“Firms’ growth expectations deteriorated in January, considering the intensified impact of the pandemic on the economy due to the beginning of a second wave of contagions and the new restriction measures,” the BCR explained.

It went on to say that global economic activity has been improving, but at a more moderate pace due to social confinement measures in the face of the new pandemic outbreak.

“The BCR’s Board considers it appropriate to maintain a strong expansionary monetary stance for a long period and as long as the negative effects of the pandemic on inflation and its determinants persist,” the bank affirmed.

The Central Bank says to continue to take the necessary steps to sustain the payments system and credit flows, and stands ready to expand monetary stimulus using a range of instruments.