Central Reserve Bank of Peru Retains 4.0% Reference Interest Rate as Expected

January 9, 2014

Monetary officials in Peru surprised the markets with a 25 basis point interest rate cut in November.  This was not repeated in December, nor at this  month’s just-completed meeting, either.  Indeed, the latest statement reads very similarly to December’s, predicting that that with current policy inflation in 2014-15 will hover very close to the 1-3% target midpoint and asserting that inflation expectations remain at the target despite current inflation that lies at the range’s upper end.  Supply factors that have buoyed inflation for now will prove temporary and reversible.  Also, actual GDP growth will fall somewhat short of potential GDP expansion.  In each of the first five months of 2011, a 25-basis point rate hike was implemented, raising the level from 3.0% to 4.25%.  This past November’s cut was the only rate change since that episode of tightening.  The next two policy announcements are scheduled for February 13 and March 13.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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