on Friday affirmed that the issuing entity has been successful in combating inflation before, although he acknowledged that there is concern about the consequences of the
"We have to inform citizens that we will constantly fight against the rise in inflation," Velarde pointed out.
"We have been quite successful in combating inflation since we adopted the objective of a negative level; nonetheless, there is a countercyclical effect, and the inflation level must be reduced in that period. Because of the pandemic, the debt had to be increased once it was necessary, and that generated higher inflation," he added.
During the International Conference for the
Centenary of the Central Reserve Bank, the governor stated that the normal or natural inflation rate in Peru is 1.5%. It is expected to be close to this level in the future.
"It is a difficult situation because we were used to a low inflation rate and since it has been so many months that we are outside our expected framework; we do not know how economic agents will react. In February, 63% of prices were already above 1.5%," Velarde indicated.
"We are all worried. Prior to the
invasion of Ukraine, there was already a high inflation rate in Asia; we already had the problem of rising prices and other repercussions prompted by inflation," he added.
The BCR governor said they were convinced that the previous situation could return by the end of 2022. Nonetheless, this is postponed for another year, and it is not known if it may be achieved during the first half of 2023.
"It has already been five times that we have failed to meet our goals over the last 20 years; however, this will be the longest period that we are not meeting our goals," he affirmed.
Moreover, the official emphasized that everyone got used to living with a low inflation rate, but now people have to see how things unfold in the future.
"The uncertainty is there, it is a reality; we believe that there will be more or less an inflation peak in our country in April; we must bear in mind that sowing (season) in Ukraine is in April, and there we will see what the situation is and what the effect on prices is," Velarde expressed.
"The price has remained more or less stable over the last 20 years, but it increased in 2021 and is now increasing much more, all due to the transmission mechanisms on international markets of the wheat price," he added.
The BCR governor stressed that Peru's fiscal policy was quite positive, given that from a deficit of 8.2% of GDP in 2020 it ended at 2.8% in 2021, "which gave us more room for maneuver than other countries."
"Getting the hyperinflation (of the 1980s and early 1990s) under control gave us a basis for pursuing successful fiscal and monetary policies," he concluded.