BCRP: “There are grounds for the sun to strengthen”

The dollar closed the week at S/ 3,776. It was during the second week of February that the exchange rate was located, for the first time in the government of Pedro Castillo, below the barrier of S/ 3.80, and could continue to decline, according to forecasts by the Central Bank of Peru Reserve (BCRP).

So far in 2022, the dollar accumulates a drop of 5.39% as of February 11. Adrián Armas, Central Manager of Economic Studies at the BCRP, explained that this is because our country has a context favourable, which is reflected in the tall prices of the products we export and this makes the Peruvian sol stronger; however, this was not previously evidenced by the uncertainty what was there for the COVID-19.

In this sense, the official expressed that there are reasons to think that the Peruvian sol can continue to strengthen; however, it should also be taken into account that the markets they are waiting for the movements of the reference interest rates of the various central banks.

“It will depend on what force prevails in the short-term evolution of the exchange rate,” Armas limited during the presentation of the February monetary program.

dollar effect

This lower exchange rate has also favored prices in the Peru decrease, as explained by the monetary entity.

An example of this has been the price of fuel (US$ 93.90 for WTI oil), which despite the fact that its international value has risen, the appreciation of the peruvian sol was able to mitigate this increase.

Inflation will converge

Regarding the evolution of annual inflation, the BCRP estimates that this will return to the target range of between 1% and 3% by the fourth quarter of this year. “Inflation in the following months will continue to be around 6% and then, with more moderate monthly rates, beginning in July the year-on-year inflation will begin to drop,” Armas added.

However, he warned that there is a persistence in the rise in international energy and food prices.

Given this, he stressed that the Central Bank is monitoring inflation expectations and that the monetary policy actions will be aimed at bringing inflation back to the target range. Armas recalled that this is not the first time that the BCRP is going through this situation, since on four occasions they have managed to get inflation back to the target range in a reasonable time.

Reaction

“There are objective reasons to think that the sun could be stronger, but, on the other hand, it is also true that there is uncertainty regarding the movement of international interest rates.”

Adrián Armas, Central Manager of Economic Studies of the BCRP