The directory of Central Reserve Bank of Peru (BCR) agreed, for the second consecutive month, to maintain the reference interest rate at 7.75%, but warned that this decision “does not necessarily imply the end of the cycle of increases” in the interest rate.
The issuing bank added through a statement that future adjustments in the reference rate will be conditioned to new information on inflation and its determinants, which includes the macroeconomic effects of recent social events.
He explained that the monthly inflation rate in February was 0.29% and that the 12-month inflation rate dropped from 8.66% in January to 8.65% in February.
Both indicators were located above the upper limit of the inflation target range, which is 3%.
The bank stressed that the significant increase in international energy and food prices since 2021 has generated a sharp increase in inflation rates globally, but that, in the Peruvian case, “this has been accentuated by social conflicts since December ”.
However, a downward trend in year-on-year inflation is now projected from March with a return to the target range in the fourth quarter of this year.
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In this regard, 12-month inflation expectations fell from 4.62% in January to 4.29% in February, above the upper limit of the inflation target range.
“The inflation expectation for the year 2023 also decreased from 4.73% to 4.5%,” he specified.
The Central Bank’s board of directors informed that it is especially attentive to the new information referring to inflation and its determinants, and that it also agreed to maintain the interest rates of operations in national currency with the financial system under the window modality.
In the case of “overnight” deposits, the rate remained at 5.25%, and in direct reporting operations of securities and currency, and Monetary Regulation Credits at 8.25% per year for the first 10 operations in the last 3 months.
Overnight deposits are a monetary regulation instrument that allows financial institutions to make deposits in national and foreign currency at the BCRP. These deposits are made for one day and are remunerated at the rate set by the Central Bank.
Likewise, it agreed on the interest rate set by the Monetary and Exchange Operations Committee for operations in addition to the 10 operations in the last 3 months.
EFE
