Peru: Another Central Bank Deterred by Global Uncertainty

August 11, 2011

Like their Norwegian and South Korean counterparts earlier this week, officials at the Central Reserve Bank of Peru left their key reference rate unchanged at 4.25%, concluding that prudence would be the better part of valor.  In their statement of explanation, the authorities cited some evidence of slowing Peruvian growth and the increased uncertainty in global activity to justify not undertaking an eleventh rate increase.  They failed to tighten again even though CPI inflation accelerated to 3.4% in July from 2.9% in June.  Core inflation has climbed to 3.2% from 2.8% in May. 

The first of ten prior rate increases was a 25-basis point move in May 2010, and the most recent one, also of 25 bps, was implemented one year later.  Six of the other eight increases were also by 25 bps, and the other two were 50 bps in size.  The cumulative increase of 300 basis points reversed 57% of the 525 basis points of ease done between August 2008 and February 2009.

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



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