Peru: Central Bank remains hawkish and lifts rates to two-year high
May 12, 2011
At its monetary policy meeting held on 12 May, the Central Bank decided to raise its reference rate by 25 basis points to 4.25%, in a decision broadly expected by the market. The decision followed on four consecutive rate hikes of 25 basis points since January this year. The main policy rate now sits at the highest level since June 2009. In its monetary program statement, the Bank claimed its decision was a preventive measure, designed to curb the impact of higher global prices for food and energy on inflation expectations. In addition, monetary officials acknowledged that current and forward-looking indicators continue to show a favourable development in economic activity, although they are now pointing to a more moderate expansion. Furthermore, the Bank stated that indicators for global economic activity remain positive, although debt woes in some developed economies in Europe and political risks in the Middle East and North Africa persist. The next monetary meeting is scheduled for 9 June.
Author: Ricardo Aceves, Senior Economist