Peruvian Monetary Tightening Paused This Month at 4.25%

June 10, 2011

The Central Reserve Bank of Peru did not implement an eleventh rate hike since May 2010 today, fooling analysts.  A statement today seized upon a drop of CPI inflation to 3.1% last month from 3.4% in April and 2.7% in March to justify the pause and also noted somewhat slower economic growth signaled by some recent coincident and leading data indicators.  However, with core inflation rising two-tenths of a percentage point last month and fourth-tenths versus the March level, the statement reiterates a readiness to tighten additionally to ensure that inflation falls within the target range.  The reference central bank rate was cut from 6.5% to 1.25% within the space of six months to August 2009, but 300 basis points of that earlier 525-basis point easing has now been reversed.  Rate increases had been made after each of the Policy Board’s earlier meetings in 2011.  Peru experienced one of Latin America’s strongest growth rates in 2010 and just elected a new president earlier this month.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.



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