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Peru: Central Bank keeps benchmark interest rate at 2.25%

11:55 | Lima, Jan. 10.

The Board of Directors of the Central Reserve Bank of Peru (BCR) decided to maintain the reference at 2.25% expecting year-on-year inflation to be around 2% over the forecast horizon, with a moderate downside bias due to the possibility of a lower-than-expected increase in domestic demand.

Likewise, the financial entity indicated that inflation was 0.21% in December. Consequently, year-on-year inflation remained at 1.9% in December 2019, while monthly inflation excluding food and energy stood at 0.34% in December, so the year-on-year figure also remained at 2.3%.  

On the other hand, BCR pointed out that the one-year ahead expected inflation remained at 2.2% last December.

According to the issuing entity, the weak performance of primary industries and General Government investment in 2019 was attenuated by the activity in non-primary industries. 

"Business condition expectations as of December remained stable with respect to November, while economic activity indicators point to a gradual closure of the output gap," Peru's Central Reserve Bank stressed.

Furthermore, it underlined that global growth risks from trade tensions have attenuated, although the impact of the recent geopolitical events on international energy prices is still uncertain. 

The BCR Board affirmed that it pays close attention to new information on inflation and its determinants in assessing future changes in the monetary policy stance.

At the same session, the Board also decided to maintain the interest rates on BCR off-auction credit and deposit operations in domestic currency with financial entities. 

It arranged: overnight deposits of 1% per year, as well as direct security/currency repo and rediscount operations: i) 2.80% per year for financial entities' first 10 operations over the last 12 months; and ii) the rate fixed by the BCR Monetary and Foreign Exchange Operations Committee for operations other than financial entities' first 10 operations over the last 12 months. It also decided that Dollar swaps should have a fee equal to a minimum annual effective cost of 2.80%.

Finally, the BCR Board's next monetary policy session will take place on February 13, 2020. 

(END) MDV/MTS/MVB

Published: 1/10/2020
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