Peru: Central Bank keeps rates unchanged but raises reserve requirements
October 11, 2012
At its 11 October monetary policy meeting, the Reserve Bank of Peru (BCRP) decided to keep the reference rate unchanged at 4.25%, in a decision that was in line with market expectations. As a result, monetary authorities have kept interest rates unchanged for 17 consecutive months, the longest period in which interest rates have remained stable. As in previous statements, the BCRP argued that its decision was justified as the deviation in inflation continues to reflect mainly temporary supply factors. In addition, the Bank signalled that the pace of economic growth remains close to its potential. The next monetary policy meeting is scheduled for 8 November. Simultaneously, the Central Bank raised the average reserve requirement ratio by 50 basis points, which follows a comparable move in May and in August. Monetary authorities argued that the move affects both national (PEN) and international (USD) deposits and seeks to moderate both the inflow of short-term foreign capital and the pace of credit growth, within a context of high liquidity abroad and exceptionally low interest rates in developed economies.
Author: Ricardo Aceves, Senior Economist