Peruvian Central Bank Rate Hike

December 9, 2021

There have now been five increases in the Central Reserve Bank of Peru’s policy interest rate since August, an initial 25-basis point move then followed by four successive monthly increases of 50 basis points each. In a released statement from the Board of Directors of the bank, officials warn investors not to assume that Peru is in a cycle of successive hikes and maintain that at 2.5%, the interest rate is still in accommodative territory as it should be. There are still downside growth risks, and inflation of 5.66% as of November was down from 5.83% in October and only 2.9% when excluding fuel and food. officials expect the pace of total inflation to receded to 3% or less some time in the second half of next year but are mindful that investors are less confident in that view with market-based measures of expected inflation a year out hovering around 3.7%.  Peru’s inflation target in the medium term is 1-3%. The new 2.5% policy rate level is the highest since November 2019. There was a 25-basis point cut that month followed by a duo of full percentage point reductions made in March and April of 2020 when the pandemic hit.

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



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