Background on the Banco Central de Perú
The Banco Central de Perú (Central Bank of Peru) is the country’s autonomous monetary authority, responsible for managing and regulating the financial system. It plays a crucial role in maintaining price stability, promoting sustainable economic growth, and ensuring the efficiency of financial intermediation.
Recent Interest Rate Decision
In a surprising move, the Banco Central de Perú announced on Thursday that it had reduced its reference interest rate by 25 basis points to 4.50%. This decision came as a surprise, as market analysts had expected the rate to remain unchanged at 4.75%.
Reasons for the Interest Rate Cut
The Central Bank stated that it aims to keep the interest rate “close to the estimated neutral level.” The bank emphasized its attention on new information regarding inflation and its determinants, including the evolution of underlying inflation, inflation expectations, and economic activity. The bank is prepared to consider necessary modifications in its monetary policy stance if required.
Inflation and Economic Activity
According to the bank, it anticipates that the interannual inflation rate will return to levels near the center of its target range in the coming months. Moreover, it expects that inflation excluding food and energy will remain around 2% “in the projection horizon.”
The Central Bank also noted that economic activity indicators showed a slight deterioration in the previous month compared to the preceding month. However, it highlighted that most indicators remained optimistic, with the economy operating close to its potential level.
Interest Rate Trend
The Banco Central de Perú had maintained the interest rate at 4.75% for three consecutive meetings in April. Since September 2023, Peru has been gradually reducing its official interest rate from 7.75%.
Key Questions and Answers
- Who is the Banco Central de Perú? The Banco Central de Perú is Peru’s autonomous monetary authority responsible for managing and regulating the country’s financial system.
- What was the recent decision regarding the interest rate? The Central Bank of Peru reduced its reference interest rate by 25 basis points to 4.50%.
- Why did the bank decide to cut the interest rate? The bank aims to keep the interest rate close to a neutral level, considering new information on inflation and economic activity.
- What are the bank’s expectations for inflation? The Central Bank anticipates that interannual inflation will return to levels near the center of its target range in the coming months, with underlying inflation expected to remain around 2%.
- How has the interest rate been trending recently? The Banco Central de Perú had maintained the interest rate at 4.75% for three consecutive meetings in April, following a gradual reduction from 7.75% since September 2023.
