The Central Reserve Bank (BCR) agreed to raise the benchmark interest rate by 50 basis points to 3.00%, the sixth consecutive hike since last August 2021.
The BCR board of directors explained that the decision is in line with the normalization of the monetary policy position.
The institution indicated that the measure is based on the fact that the twelve-month inflation rate increased from 5.66% in November to 6.43% in December, which was temporarily above the target range due to factors such as the increase in prices. international food and fuel inputs, as well as the exchange rate.
“Inflation is projected to return to the target range in the fourth quarter of this year, due to the reversal of the effect of transitory factors on the inflation rate (exchange rate, international prices of fuels and grains) since the economic activity will be located still below its potential level”, He said.
“Most indicators of expectations about the economy continue in December in the pessimistic section”He added.
The directory also took into account that world economic activity has been recovering at a slower rate due to outbreaks of COVID-19 infections and the appearance of new variants, in addition to the bottlenecks of the global supply of goods and services, so that “The recovery process is expected to continue in the coming quarters as vaccination in the world and significant fiscal stimulus programs in developed countries continue to advance.”
“The Board of Directors is especially attentive to new information regarding inflation expectations and the evolution of economic activity to consider, if necessary, modifications in the monetary policy position that guarantee the return of inflation to the target range. With the information available, it is considered convenient to continue with the normalization of monetary policy in the coming months. The financial markets have continued to show volatility in a context of uncertainty and the actions of the BCRP were oriented to attenuate said volatilities”, He specified.
At a board meeting, the following interest rates for the BCR’s operations in national currency with the financial system were also agreed upon under the window modality.
- Overnight deposits: 1.85% per annum.
- Direct reporting operations of securities and currency, and Monetary regulation credits: 3.50% per annum.
The next session in which the monetary program will be evaluated is scheduled for February 10, 2022.
