Central Reserve Bank of Peru Lifts Interest Rate by Half a Percentage Point

November 12, 2021

At the Central Reserve Bank of Peru, the Board of Directors felt compelled to react to a 0.6 percentage point further acceleration of CPI inflation to 5.8% in October, its highest level since the start of 2009. Officials attribute the rise mostly to external factors but also mentioned the Peruvian Sol’s recent depreciation. Their hope and expectations is that in-target inflation is restored sometime in the latter part of 2022. Today’s hike of the reference interest rate to 2.0% was 50 basis points in size and followed similar increases in September and October and an initial 25-basis point tightening in August. Early in the pandemic, the rate was slashed from 2.25% to 0.25% in two equal full percentage point cuts in March and April of 2020. One more 25-basis point hike, and that entire easing will have been reversed, but to quell such thinking, today’s released statement of explanation asserts, “Monetary policy is still expansionary and the current decision does not necessarily imply a cycle of successive increases in the reference rate.”

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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