The Central Reserve Bank (BCR) agreed to raise the reference interest rate by 50 basis points for the seventh consecutive time, reaching 3.50%, amid the normalization of the monetary policy position.
The entity explained that its decision was based on the fact that the twelve-month inflation rate stood at 5.68% in January, temporarily above the target range due to factors such as the increase in international prices of food supplies and fuels, as well as the exchange rate.
Likewise, the twelve-month inflation rate without food and energy stood at 3.08% in January, above the upper limit of the inflation target range.
According to the BCR, it is estimated that inflation will return to the target range in the fourth quarter of this year, due to the reversal of the effect of transitory factors (exchange rate, international fuel and grain prices) and that economic activity will still be below its potential level. However, the entity considers that there is greater persistence in the rise in international energy and food prices.
The decision of the board of directors of the central bank is also based on the fact that most of the indicators of expectations about the economy continue in January in the pessimistic section.
On the other hand, world economic activity has been recovering, although at a slower rate due to the impact of COVID-19, the persistence of bottlenecks in the global supply of goods and services, and relative uncertainty associated with the rate of reversal of stimuli. money in advanced economies.
“The board of directors is especially attentive to the new information regarding inflation and its expectations and the evolution of economic activity to consider, if necessary, changes in the monetary policy position that guarantee the return of inflation to the target range in the projection horizon. The financial markets have continued to show volatility in a context of uncertainty and the BCRP’s actions were aimed at mitigating said volatility”, referred the monetary entity.
On the other hand, the following interest rates were agreed for operations in national currency of the BCRP with the financial system under the window modality.
- Overnight deposits: 2.25% per annum.
- Direct report operations of securities and currency, and Monetary regulation credits: 4.0% per annum.
The next board meeting in which the monetary program will be evaluated is scheduled for March 10, 2022.
