Patricio Quintanilla Paulet, rector of U La Salle
Recently, the Congress of the Republic has elected the three members of the Board of Directors of the Central Reserve Bank of Peru (BCR) and previously the Executive Power, the other three positions that correspond to them.
Julio Velarde had previously been ratified as president of the Issuing Institute. The Board of Directors is complete, with very high-level professionals, with qualifications and skills that ensure efficient and effective management.
The Role of the BCR
Its most popularly known function is the issuance of bills and coins, which we all use daily, as it is the only institution authorized to do so; however, it is not the most important for the economic stability of the country.
What is relevant is the regulation of the amount of money in circulation, due to the impact it has on the general price level, that is, inflation. If the quantity of money increases, economic agents increase their demand and, as a consequence, prices rise. This is the law of supply and demand; A simple and clear example of this is the behavior of the price of fish at Easter, the increase of which is explained by the higher demand at the time.
For this regulation, the BCR uses different instruments.
• Lace. The institutions of the financial system are obliged to allocate a percentage of the deposits they collect and keep them in their cash, which is called “reserve requirements”. If the BCR increases this percentage, the entities reduce their loans and with it the demand for consumption and investment.
•Interest rate. The market freely sets said rate, but every second Thursday of the month the BCR publishes the so-called “monetary program”, which sets the reference interest rate; As its name indicates, it is a benchmark for transactions between banks, but it has an effect on the money market.
•Exchange rate. Likewise, the exchange market determines the price of the dollar by supply and demand; However, the BCR can intervene through the so-called “dirty float”, buying or selling foreign currency and thus influencing its price.
• Other instruments, aimed at influencing the amount of money in circulation.
conclusion
The Central Reserve Bank is an autonomous institution and therefore independent from political power and decisions are made exclusively by its Board of Directors.
For this reason it is very important a proper selection of its members, to guarantee correct decisions that contribute to monetary and economic stability; on this occasion all its members, due to their professional quality, guarantee excellent management.
Success, dear colleagues.
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Kingston is an accomplished author and journalist, known for his in-depth and engaging writing on sports. He currently works as a writer at 247 News Agency, where he has established himself as a respected voice in the sports industry.
