Peruvian Monetary Policy Kept on Hold

October 15, 2012

The main interest rate of the Central Reserve Bank of Peru was left at 4.25%, its level since a 25-basis point hike in May 2011 capped a ten-step uptrend from a trough of 1.25% in the Great Recession.  Five of those hikes totaling 175 bps were implemented between May 2010 and September 2010, and the remainder –all moves of 25 basis points — were done in the first five months of 2010.  Previously, the benchmark was slashed from 6.5% to 1.25% between February and August of 2009.  The latest decision to keep policy on pause was announced late last week.  Inflation is currently higher than desired but, according to monetary authorities, only because of supply-side strains that will not be sustained.  Growth does not exceed trend, so demand-pull pressure isn’t a pressing concern. 

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

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