Peruvian Central Bank Rate Hike

May 12, 2022

The Central Reserve Bank of Peru’s policy interest rate had been at 2.25% when the pandemic struck in early 2020. Back-to-back percentage point cuts in March and April pinned the rate at 0.25% where it remained for fifteen months. Peruvian CPI inflation of 1.6% in June 2020 had constituted an 18-month low and in the lower half of the CRBP’s target range of 1-3%. But by the August 2021 monthly policy board meeting, inflation had risen above the target ceiling to 3.8%, and a cycle of rate hikes was begun, initially with a 25-basis point increase to 0.50%. Tightening hasn’t skipped a meeting yet. Month by month, the rate was subsequently hiked by 50 basis points starting with the September review, and today’s increase lifts it to 5.0%, its highest since 2009. Even with that diligent attention, inflation rose pretty much in tandem, reaching a 285-month high of 7.96% last month. Street protests have added some urgency to the effort to show progress that the tightening of monetary policy is having some effect. Officials are predicting a return to in-target inflation by sometime within the middle two quarters of 2023 and are hoping that external factors do not make that goal elusive.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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