Second Easing in Seven Months by Central Reserve Bank of Peru

July 11, 2014

Peru’s reference interest rate has been cut to 3.75% from 4.0%.  A reduction to 4.0% from 4.25% last November was the first cut in just over four years.  In between from a low of 1.25%, the central bank rate was increased by 175 basis points during 2010 and by 125 bps in the first five months of 2011.  A statement from monetary officials expresses a readiness to ease additionally if necessary but suggests that such a need will be probably unlikely.  In justification of the latest rate cut, which returns the rate to its level in April 2011, the statement notes continuing sub-trend domestic growth, moderating supply-side cost pressures, lower inflation in June than May, well-anchored inflation expectations, and some disappointing indications related to global demand conditions.  CPI inflation is expected to drop to the upper part of the 1-3% target corridor in 2014 and to converge on the target midpoint next year.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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