The Board of the Central Reserve Bank of Peru approved to raise the monetary policy interest rate by 25 basis points to 4.25%, considering a gradual return of inflation to the inflation target range —between 1% and 3%.
Inflation has been affected by temporary supply factors, such as the rise in the prices of some food products and utilities, as well as by the depreciation of the sol against the dollar.
“These increases in consumer prices have affected the expected rate of inflation, pushing it above the target range, which can fuel inflation in turn,” the issuing entity explained.
According to BCR, the local economic activity has been recovering and the global economy continues showing volatility in exchange rates, in stock prices and in commodity prices, with mixed signals of recovery in terms of production and employment in the larger economies.
“The Board oversees the inflation forecasts and inflation determinants, including how inflation expectations evolve, to evaluate the convenience of making additional adjustments in the monetary policy rate. Inflation is expected to gradually return again within the target range in a period of time similar to the monetary policy horizon,” it continued.
Inflation
Inflation in January showed a rate of 0.37%, as a result of which the interannual rate of inflation rose from 4.4% in December to 4.6% in January.
“The monthly rate of inflation is explained by the increase observed in prices of perishable food products and electricity rates. Inflation without food and energy recorded a rate of -0.07%, as a result of which the interannual rate of inflation declined from 3.5% in December to 3.4% in January. In this month, the rate of inflation expected for 2016 was 3.5% and the rate of inflation expected for 2017 was 3%.
Growth
Recent indicators of economic activity and business and consumer expectations show an economic cycle with lower GDP growth rates than the potential output levels until the third quarter of 2015, but with a faster pace of growth in the last quarter of the year.
In 2016 the economy is foreseen to grow at rates similar to those of the potential output.
(END) CNA/CNA/RMB
Published: 2/12/2016