Peru Gets a 50-Basis Point Central Bank Rate Hike

August 5, 2010

Analysts had not expect a rate hike of as much as 50 basis points delivered by the Central Reserve Bank of Peru.   This move was twice as much as the ones in May, June and July and brought the cumulative withdrawal of stimulus to 125 basis points, just 25 bps less than Brazil’s central bank has managed.  Peru’s reference rate is now 2.5%, up from a cyclical low of 1.25% maintained for nine months from August 2009 to early May 2010 but below the prior cyclical high of 6.5% at the start of last year.  Cuts totaling 525 bps in every month from February to August of last year had been made aggressively, and with today’s doubled rate advance, officials signaled that the withdrawal of the emergency stimulus will also not dawdle.  Officials call these moves preventive.  Peru has been experiencing very dynamic growth in domestic demand and exports, and GDP is likely to expand at close to a 9% pace.  Core inflation picked up to 1.8% as of July, not far beneath the 2.0% target.  The next meeting is set for September 9.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



Comments are closed.