Peru: Central Bank leaves rate unchanged in March
March 13, 2014
The Central Bank decided to maintain the reference rate at 4.00% at its 13 March monetary policy meeting, which was in line with market expectations. As in its two previous meetings, the Central Bank stated that the Peruvian economy continues to perform below potential even though economic growth accelerated in Q4 2013. In contrast to the February report, the Bank did not show special concern regarding the performance of the external sector in its latest comments, although it did acknowledge that, “recent indicators paint a mixed picture of the recovery of the global economy.” The Bank also stated that recent economic indicators point to an acceleration in the first quarter of this year. The Bank expects that inflation will remain at the upper band of its target range of 1.0%-3.0% in the coming months due to the delayed impact of recent supply shocks. In fact, annual inflation increased from January's 3.1% to 3.8% in February. However, the monetary authority sees inflation converging to 2.0% in the medium- and long-term. The Bank also announced that it had lowered the average reserve requirement ratio for local currency deposits from 13.0% to 12.5%. The decision, which followed similar moves in January and February, is aimed at supporting the expansion of credit in local currency as part of the Bank's objective is to progressively reduce the degree of dollarization in Peruvian financial markets. The next monetary policy meeting will be held on 10 April. The majority of the panelists polled by FocusEconomics expect monetary authorities to maintain the reference rate unchanged at 4.00% this year. For 2015, the panel expects an average monetary policy rate of 4.37% at the end of the year.