He Central Reserve Bank of Peru (BCRP) announced this Thursday, August 10, that the board of directors will maintain the reference interest rate at 7.75% for the seventh consecutive month, which does not necessarily imply the end of the cycle of increases, which are conditional on changes.
The BCRP took into account that the 12-month inflation rate dropped from 6.46% in June to 5.88% in July. However, it is specified that although there is a decrease for the second consecutive month, they are still located above the upper limit of the target range, which is between 1 and 3%.
The institution’s projections are to maintain a downward trend in year-on-year inflation and by the end of 2024 to be able to get closer to the target range. This is due to the moderation of the effect of international food and energy prices, and the reversal of supply shocks in the agricultural sector. However, there are risks associated with climatic factors.
“The leading indicators and expectations for the economy in July show a moderate recovery compared to the previous month, although they still remain in the pessimistic range. The shocks derived from social conflicts and the coastal El Niño have had a greater than expected impact on economic activity and domestic demand”, the document can be read.
It should be noted that 12-month inflation expectations fell from 3.83% in June to 3.57% in Julywhich places it above the upper limit of the inflation target range.
In this session, it was also agreed to maintain the following interest rates for BCRP operations in national currency with the financial system under the over-the-counter modality:
- Overnight deposits: 5.25% per year.
- Direct repo operations of securities and currency, and monetary regulation credits: i) 8.25% per annum for the first 10 operations in the last three months; and ii) the interest rate set by the Monetary and Exchange Operations Committee for additional operations to these 10 operations in the last three months. In addition, the Monetary and Exchange Operations Committee may establish higher rates based on the amount of the operations.
The next session will be on Thursday, September 14, 2023.
Source: Larepublica
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