The directory of Central Reserve Bank of Peru (BCR) agreed to raise the reference interest rate from 4.50% to 5%, continuing with the normalization of the monetary policy position. This is the highest rate since April 2009.
According to a statement, for this decision the twelve-month inflation rate was taken into account, which increased from 6.82% in March to 7.96% in April, being above the target range due to the resurgence of significant increases in the international prices of food supplies. and fuels.
Meanwhile, the twelve-month inflation rate excluding food and energy also increased from 3.46% in March to 3.81% in April, above the upper limit of the inflation target range.
“The significant increase in international energy and food prices since the second half of last year, recently accentuated by international conflicts, has led to a sharp increase in global inflation rates to magnitudes not seen in many years in advanced economies and of the region. With this, it is projected that inflation would return to the target range between the second and third quarters of next year”, referred the monetary entity.
The BCR indicated that the downward path of year-on-year inflation would begin in July of this year, due to the beginning of the reversal of the effect of various factors on the inflation rate and its expectations (exchange rate, international fuel and grain prices). since economic activity will still be below its potential level.
Another factor is that twelve-month inflation expectations rose from 4.39% to 4.62%, above the upper limit of the inflation target range.
In addition, most indicators of expectations about the economy deteriorated in April.
In the international environment, the BCR notes that world economic activity has been recovering, although at a slower pace due to the persistence of bottlenecks in the global supply of goods and services, the reversal of monetary stimuli in advanced economies, confinement measures in China and international conflicts.
In addition, the board of directors of the monetary entity mentioned that it is attentive to the new information regarding inflation and its determinants, including the evolution of inflation expectations and economic activity, to consider additional modifications in the monetary policy position that guarantee the return of inflation to the target range in the projection horizon.
