The president of the Central Reserve Bank of Peru (BCRP), Julio Velarderecently said in an interview with Bloomberg that he is wary of the risk of easing monetary policy prematurely before inflationary pressures have subsided.
“We have to be sure that inflation is defeated. The worst scenario for the central banker is to lower the interest rate only to raise it again two or three months later,” Velarde said on Friday.
The BCRP president expects Peru’s inflation rate to drop to 3% by the end of the year, from 8.4% in March. If that scenario plays out, the bank’s next move could be a cut.
“If that projection is maintained, we would not see the need to raise the interest rate. Instead, it would be a rate cut scenario at some point,” he commented.
In this regard, Velarde stressed that traders are not betting on more rate increases in Peru, but they do not expect the nation to lead monetary easing in Latin America this year. “Investors expect either Chile or Brazil to cut rates first,” he said.
In addition, he highlighted that the Peruvian inflation rate is on a downward trajectory, but it is unlikely that its fall will be smooth and there may be months in which it will not slow down.
The BCRP maintained the reference interest rate at 7.75% for the third consecutive month in March. In his latest report, he indicated that future adjustments will take into account the macroeconomic impact of elements such as social events.
With information from Bloomberg.
Source: Larepublica
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