Central Bank of Peru: No Rate Change this Month

December 12, 2013

Officials did not spring a surprise rate cut in December as they had in November.  The reduction in November was the first cut since February 2010.  In the year from May 2010 through May 2011, the Peruvian reference interest rate was lifted ten times from a low of 1.25% to 4.25% where such remained until the cut last month.

In justifying a 4.0% reference rate, a statement released today asserted that such will generate inflation in 2014-15 around the midpoint of the 1-3% target for four reasons: “i) inflation expectations remain anchored within the inflation target range; (ii) the GDP growth has been registering less than its potential rate; (iii) recent indicators show some recovery in the global economy; and (iv) the supply factors that raised inflation are rolling back.”  Projected GDP growth in 2014 of slightly more than 5.0% falls short of Peru’s assumed potential non-inflationary growth trend by roughly a full percentage point.  Monthly indicators point to faster growth in the final quarter of 2013 than the sub-5% pace earlier in the year.  CPI inflation currently is hovering a smidgen below 3.0%.  Such is expected to stay near the top of the target range in the immediate period ahead but settle back toward 2% later next year.

The first policy meeting of the central bank in 2014 is scheduled for January 9.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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