Peru: Central Bank continues tightening the reins
April 8, 2011
At its monetary policy meeting held on 8 April, the Central Bank raised the reference rate from 3.75% to 4.00%, in a decision broadly expected by the market. The decision followed on three consecutive rate hikes of 25 basis points in January, February and March. The policy rate now sits at the same level observed in May 2009. In its report, the Central Bank stated that its decision aims to curb the impact of higher global food and oil prices on inflation expectations in a context of rapid economic growth. Furthermore, monetary officials acknowledged that indicators for global economic activity remain favourable, pointing to resilient recovery, although risks regarding the conflict within the Middle East and North Africa and the fiscal position of some industrialised countries persist. The next monetary meeting is scheduled for 12 May. Moreover, in order to complement the Bank's gradual withdrawal of the monetary stimulus, the Central Bank raised the average reserve requirement ratio (affecting both national (PEN) and international (USD) deposits) for a third consecutive month. On 31 March, monetary officials announced another RRR hike of 50 basis points, effective on 1 April.
Author: Ricardo Aceves, Senior Economist