This Thursday, the board of the Central Reserve Bank of Peru (BCRP) agreed to raise the benchmark interest rate to 2%, maintaining an expansionary monetary policy stance.
It is worth mentioning that previously the reference interest rate was at 1.50%, and this rebound of 50 basis points was decided upon considering that 12-month inflation rose from 5.23% in September, to 5.83% in October, passing 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.
“Monetary policy continues to be expansive and this decision does not necessarily imply a cycle of successive hikes in the reference interest rate,” the BCRP details in a statement.
The issuing entity foresees that inflation will return to the target range in the second half of next year, due to the reversal of the effect of transitory factors on the inflation rate (exchange rate, international prices of fuels and grains) since economic activity will still be below its potential level.
And they recalled that inflation expectations for twelve months remained at 3.6% in October and for the year 2022, at 3.3%, slightly above the upper limit of the inflation target range.
On the other hand, he said that most indicators of expectations about the economy have improved in October, but some are located in the pessimistic section.
“The world economic activity, although at a slower pace, has been recovering and this process is expected to continue in the coming quarters as vaccination in the world and significant fiscal stimulus programs in developed countries continue to advance,” they point out.
Modification of monetary policy
On the other hand, the board of directors of the BCR noted that they are attentive to the new information regarding inflation expectations and the evolution of economic activity to consider, if necessary, modifications in the monetary policy position.
“With the information available, it is considered convenient to maintain the expansionary monetary policy position for a prolonged period, through the gradual withdrawal of the monetary stimulus,” the statement reads.
They also indicate that the financial markets have continued to show volatility in a context of uncertainty and the actions of the issuing entity were aimed at mitigating said volatilities.
In the same session, the board of directors of the BCR agreed to raise the following interest rates of the operations in national currency of the issuing entity with the financial system under the window modality.
i) Overnight deposits: 1.85% per annum.
ii) Direct reporting operations of securities and currency, and Monetary regulation credits: 2.50% per annum.
The next session of the BCR board of directors in which the monetary program will be evaluated is scheduled for December 9, 2021.
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