The Board of the Central Reserve Bank of Peru approved to raise the monetary policy interest rate by 25 basis points to 3.50%, which is compatible with the forecast that inflation will converge to the target range in the 2015-2016 forecast horizon.
Inflation expectations have increased, reaching levels similar to the upper rate of the inflation target range; and inflation has been affected by temporary events, such as the rise of prices of some food products and the exchange depreciation, factors that should not be extended in a general manner to the rest of prices.
According to the issuing entity, international indicators show mixed signals of global economic recovery, as well as high volatility in external financial markets and foreign exchange markets. It also informed that economic activity has been recovering gradually.
Expansionary Monetary Policy
The new level of the policy rate is compatible with a real interest rate of 0.5% and reflects an expansionary monetary policy stance.
The Board oversees the inflation forecasts and inflation determinants and stands ready, should it be necessary, to make adjustments in its monetary policy rate to lead inflation to the target range. The Board points out that the Central Bank has not started a sequence of hikes in its policy interest rate.
Inflation in August showed a rate of 0.38%, as a result of which the interannual rate of inflation rose from 3.56% in July to 4.04% in August.
Recent indicators of economic activity and business and consumer expectations continue showing an economic cycle with lower GDP growth rates than the potential output levels, but with a faster pace of growth in the second half of the year.
It is estimated that the economy would be growing at rates similar to those of the potential output in 2016. The Board also approved to raise the annual interest rates on lending and deposit operations in domestic currency between the BCR and the financial system
The Monetary Program for the following month will be approved on the Board meeting to be held on October 15, 2015.
(END) JJN/JJN/RMB/MVB
Published: 9/11/2015