Peru: Central Bank surprises market and leaves rates on hold
June 9, 2011
At its monetary policy meeting held on 9 June, the Central Bank decided to maintain the reference rate at 4.25%, surprising the market, which had anticipated an additional 25-basis-point increase. The decision follows five consecutive rate hikes of 25 basis points since January this year, which pushed the main policy rate to its highest level since June 2009. In its monetary program statement, officials claimed that recent data point to a moderation in economic activity and inflation pressures remain at bay, with annual consumer prices increases easing in May. In addition, the Central Bank stated that indicators for global economic activity show less favourable developments, particularly in Japan and the U.S. economy. Moreover, debt woes in some developed countries in Europe and political risks in the Middle East and North Africa persist. The next monetary policy meeting is scheduled for 7 July. Meanwhile, Finance Minster Ismael Benavides stated that policymakers may have room to keep interest rates on hold in the coming months, as inflation continues to moderate and investors await clear signs from the newly elected president Ollanta Humala on the direction of economic policy.
Author: Ricardo Aceves, Senior Economist