Will interest rates on loans go down? This is what the BCRP says

In its last board meeting, the Central Reserve Bank of Peru (BCRP) reduced—for the second consecutive month— the interest rate reference by 25 basis points to 7.25%. However, the monetary authority specified that this decision does not imply a “cycle of successive reductions.”

Will interest rates go down?

Adrián Armas, central manager of Economic Studies at the BCRP, explained that the reduction in the reference rate will have an impact on the creditsHowever, the effect will depend on the type of financial product. However, he reported that for some months now a drop in the interest rates of the entities in the system has been observed.

“The impact depends on the type of credit and deposit we are talking about. Generally, the impact is immediate in very short-term financial contracts, it is stronger in the money market and It is also worth mentioning that interest rates have already begun to reduce for two or three months.; and this reduction has to do with the fact that the markets have an expectation about the future monetary policy interest rate, as happens everywhere. So, that effect is already beginning to be seen,” said Armas during the presentation of the October monetary program.

Along these lines, the BCRP official hopes that the financial cost of credits will continue to decline. “The interest rates have begun to decline, depending on market expectations it would be expected that this will possibly continue. “That’s going to imply lower interest rates,” he added.

Regarding the lower demand for creditsthe monetary entity indicated that this responds to the lower performance of the national economy, therefore, it hopes that, once a recovery is observed in the GDP, the population will once again demand more financing.