Peru: Central Bank hikes interest rate to 4.00%
January 14, 2016
The Central Bank decided to raise the reference rate from 3.75% to 4.00% at its 14 January monetary policy session, meeting market expectations. The Bank’s increase is the third in the past five months and is designed to counter inflation fueled in part by currency depreciation.
According to the Central Bank, inflation pressures have increased again, however, in part due to temporary factors. The Bank also explained that inflation expectations are above the target range, although monetary authorities are monitoring the situation closely and willing to make further adjustments to monetary policy if needed.
The Central Bank explained that the Peruvian economy continues to perform below potential, but that that a gradual recovery is underway and GDP growth should perform close to its potential in 2016. As for international developments, the Bank noted that there were mixed signals regarding the recovery of the global economy and that there is still volatility in foreign exchange and financial markets.
Against this backdrop, the Bank considered it appropriate to raise the reference rate. The next monetary policy meeting is scheduled for 11 February.
Author: Carl Kelly, Economist