Peruvian Monetary Policy Continues on Hold

July 12, 2012

The monetary policy reference rate of the Central Reserve Bank of Peru was cut slashed during the Great Recession from 6.5% to 1.25% by February 2009.  Rate normalization began in May 2010, and there were ten rate hikes over the ensuing year to 4.25%.  No further change has been made since May 2011, and that includes the meeting concluded on July 12.  A statement on the central bank web site attributes above-target 4.0% CPI inflation to transitory supply-side factors, predicts that inflation will settle back in the second half of 2012, and also assumes that GDP will grow along its potential trendline, implying a neutral impulse from demand-pull factors on prices.  CPI inflation excluding food and energy is running below the headline series at 2.5%, and Peru’s terms of trade has fallen.  Financial market continue to be challenged by unduly high uncertainty.  Officials seem in no hurry to change their policy stance.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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