Peru Monetary Policy February 2016


Peru: Central Bank hikes interest rate to 4.25%

February 11, 2016

The Central Bank decided to raise the reference rate from 4.00% to 4.25% at its 11 February monetary policy session, meeting market expectations. The Bank’s increase is the fourth in the past six 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 added that inflation expectations are above the target range, although monetary authorities are monitoring the situation closely. The Bank also pointed out that the global economy continues to exhibit volatility, particularly across exchange rates.

The Central Bank explained that the Peruvian economy continues to perform below potential, but that growth likely picked up in the last quarter of 2015. The Bank sees GDP growth performing close to its potential in 2016.

Against this backdrop, the Bank considered it appropriate to raise the reference rate. The next monetary policy meeting is scheduled for 10 March.

Panelists participating in the LatinFocus Consensus Forecast expect an average monetary policy rate of 4.36% at the end of 2016. For 2017, the panel projects an average rate of 4.41% at the end of the year.

Author: Angela Bouzanis, Senior Economist

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Peru Monetary Policy Chart

Peru Monetary Policy February 2016

Note: Central Bank Reference Rate in %.
Source: Peru Central Bank (BCRP).

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