Peru holds policy rate at 2¾% as indicators show ‘greater dynamism’

By Wendy Van Sickle

Columbus, Ohio, May 11 – The Central Reserve Bank of Peru’s board decided to maintain its monetary policy interest rate at 2¾% during its meeting for May.

The bank said in a press release issued Thursday that year-over-year inflation rose slightly to 0.48% in April from 0.37% in March, but continued to be below 1%, the lower band of the inflation target range. The bank attributed this mainly to the reversal of supply shocks as economic activity remains lower than the potential level of growth.

Meanwhile, the expected year-over-year inflation rate fell slightly in April to 2.17%.

Indicators of economic activity show clear signs of greater dynamism, but GDP remains below its potential growth level, the bank said.

The year-over-year inflation rate is expected to return to within the target range in the second quarter and gradually converge to 2% by the end of the year.

Inflation without food and energy recorded a rate of 0.01% in April, as a result of which the year-to-year rate fell to 1.91% from 1.99% in March, which is within the target range.

The bank said most indicators of business expectations improved in April and continue to be on the optimistic side.

The board maintained the rate for overnight deposits at 1½% and the rate for direct repos and rediscount operations at 3.3% for the first 15 operations carried out by a financial institution in the last 12 months.

Swaps also held to a commission equivalent to a minimum annual effective cost of 3.3%.

The board will meet next on June 7.

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