Peruvian Central Bank Rate Unchanged at 1.25%

September 11, 2009

The Central Reserve Bank of Peru left its monetary policy reference interest rate at 1.25%, an outcome which was expected but nonetheless breaks a streak of monthly cuts since February.  At first rates were reduced slowly from a peak of 6.5%, dropping by 25 basis points each in February and March.  However, in response to a rapid deceleration of CPI inflation amid negative economic growth, monetary officials enacted four straight 100-basis point cuts to 2.0% by July and capped that off with a greater-than-projected 75-bp reduction in August to 1.25%.  Today’s released statement from the central bank stresses the sharp decline of CPI inflation to a two-year low of 1.87% from 6.65% last December and evidence that expected inflation has also receded.  Green shoots of economic recovery are now sprouting up, but very low inflation should permit the ultra-easy monetary policy to be retained for the time being.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.


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