Macroeconomic stability is the set of State policies that allows the proper functioning of a country’s economy. These are key because they promote the economic growth sustainable, keep low the inflation and protect the country from any crises that may arise.
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According to Julio Velarde, president of the Central Reserve Bank (BCR), one of the essential policies for the stabilization process of the Peruvian economy was the “fiscal commitment.” He indicated that with this: “the Government promised to never ask the Central Bank for money again and it fully fulfilled its promise.”
Velarde also highlighted the independence of the central bank as another key policy, since this, together with the fiscal solvency gained over the last 30 years, were fundamental to Peru’s success in implementing countercyclical policies during the COVID-19 period.
He explained that in a context of confinement that led many companies to stop producing, the BCR was able to reduce its interest rate to 0.25% and provide liquidity to the business sector to avoid a break in the payment chain; in addition, the Peruvian government had access to international markets, which allowed it to borrow at fairly low rates.
Price stability
The BCR head added that the central bank’s independent monetary policy to achieve its objective of price stability, coupled with the credibility achieved by the institution, was crucial to achieving the low levels of inflation observed.
“I think that the suffering of hyperinflation and the adjustment process were so significant that there was a broad consensus that there had to be prudent policies, both fiscal and monetary. On the monetary side, there is still a consensus for an independent central bank and that, I think, will continue,” Velarde said.
The prominent Peruvian central banker spoke about Peru’s experience in combating hyperinflation in Peru in the 1990s, and the achievements obtained after a difficult process of stabilizing the Peruvian currency and the economy in general.
Velarde, together with the president of the Central Bank of the Argentine Republic, Santiago Bausili, participated in the Annual Convention of the Argentine Institute of Finance Executives (IAEF), “Change to integrate. The challenge of building the Argentine dream”.
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