BCRP raises the reference rate to 7.75%

The directory of Central Reserve Bank (BCR) agreed to raise the reference interest rate by 25 basis points to 7.75%, and with this continued with the adjustments of the monetary policy position. The first factor that influenced this decision is the inflation rate, which increased from 8.45% in November to 8.46% in December, due to higher food prices, while the twelve-month inflation rate without food and energy it was reduced from 5.71% to 5.59%. Both indicators were above the upper limit of the inflation target range.

The entity projects a downward trend in year-on-year inflation since March with a return to the target range in the fourth quarter of this year, due to the moderation of the effect of international food and energy prices, and a reduction in inflation expectations.

“Twelve-month inflation expectations fell from 4.68% in November to 4.30% in December, above the upper limit of the inflation target range. Most of the leading indicators and expectations about the economy recovered in December, although it remains in the pessimistic range,” they explained.

In addition, they specified that the restrictive monetary policy in advanced economies, the impact of inflation on consumption and international conflicts have had a negative effect on the growth prospects of world economic activity.

The Board of Directors confirmed its commitment to continue analyzing indicators such as inflation to take the necessary measures, In this sense, he confirmed that his next meeting will be on Thursday, February 9.

It should be noted that the Board of Directors agreed on the following interest rates for BCRP operations in national currency with the financial system under the over-the-counter modality.

• Overnight deposits: 5.25 percent per year.
• Direct repo operations of securities and currency, and Monetary Regulation Credits: 1) 8.25% per annum for the first 10 operations in the last 3 months; and 2) the interest rate set by the Monetary and Exchange Operations Committee for additional operations to these 10 operations in the last 3 months. In addition, the Monetary and Exchange Operations Committee may establish higher rates based on the amount of the operations.