Central Reserve Bank of Peru’s Main Interest Rate Unchanged since May 2011

December 6, 2012

Peruvian monetary officials defended today’s decision not to change the overnight interest rate of 4.25% on the following grounds: “inflation continues shrinking, having returned to the target range to partially reverse shocks from the supply side, in an internal environment characterized by a close to its potential economic growth and a still highly uncertain external environment.”  On-year total CPI inflation fell 0.6 percentage points last month to an in-target 2.7%, and core and total inflation are projected to converge on the target midpoint of 2% during 2013.  This month’s statement from central bank officials does not mention the sol, whose excessive appreciation this year evoked a series of reserve requirement hikes in the second half of 2012.  GDP growth of over 6% tops the Latin American leader board. 

From February to July 2009, the key interest rate was slashed from 6.5% to 1.25%.  Starting in May 2010, the rate was lifted at five straight monthly meetings by 25 basis points three times and then 50 bps in August and September.  No changes were made in 4Q10, but an increase of 25 bps was implemented at each meeting during the first five months of 2011.  The last of these in May 2011 left the rate at 4.25%, where such has stayed ever since then.  The first meeting of 2013 is scheduled for January 13.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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