on Thursday said that having a 2% inflation target contributes to a more stable exchange rate.
The official made these remarks during a speech after receiving an honorary doctorate from Universidad Andina del Cusco. There, he highlighted the BCR's autonomy in achieving monetary policy results.
"I believe it has greatly facilitated the Central Bank's work to have a clear objective: price stability; that is what we have focused on, and second, the autonomy we have had," Velarde stated.
He said the issuing body's decision-making autonomy is "extremely important" because it allows decisions that support long-term monetary stability, since "the political cycle is different from the economic one."
"If one tries to stimulate demand and be popular, it yields results in the short term—the economy responds—but then inflation follows. So, the political cycle often does not align with the best long-term decision," Velarde indicated.
"That is why most countries in Europe and the Americas have granted autonomy to their central banks," he stressed.
The BCR head said the decisions a central bank makes on monetary policy are not aimed at opposing the governments in office, but at fulfilling its duty to keep inflation under control.
"It is simply not a matter of being against the government, but of making decisions so that prices remain stable and inflation stays low, which often does not align with the political cycle," Velarde explained.
In that regard, he reiterated the importance of education and meritocracy, which allow the BCR to recruit professionals for its technical areas by selecting the best Economics students from various universities in Peru, who first complete courses at the issuing body.
"Fortunately, we have managed to insulate ourselves from political pressure. Fortunately, I have not even had the occasion to say no, simply because they have not dared ask me for a recommendation to appoint someone," Velarde said.
"What we truly want is for anyone who joins to do so on the basis of their own merits and abilities, not because of someone's recommendation or because they are a relative or a friend of someone," he added.
Price stability
"The price stability we have achieved means that we are in the longest period of low inflation in Latin America among countries with their own currency," Velarde highlighted.
He also noted that inflation in 2024 and 2025 was lower than in Japan, the United Kingdom, the United States, and Europe.
Velarde said the inflation currently being experienced is due to the shock from international oil prices, the disruption of natural gas supply in the country, and the likely impact of El Niño phenomenon on food prices.
"But the inflation central banks focus on is the kind that does not respond to these shocks; it is inflation driven more by demand-side factors. In other words, there is nothing we can do if global oil prices rise. From the central bank's side, nothing can be done," he explained.
Furthermore, the expert underscored the importance of fuel price stabilization funds to tackle these external shocks.
Fuel prices have already begun to decline
"But fortunately, over time fuel prices have already started to correct, and we expect almost all of this year's increase to be reversed, if the situation of peace in Iran is maintained," Velarde emphasized.
On the other hand, the economist highlighted that the BCR aims for an inflation rate like that of the United States, the United Kingdom, the European Union, Japan, and China, which is 2%.
"We are the only country in Latin America with that target. I do not see why Latin Americans have to accept higher inflation than developed countries. I say this because other well-managed countries such as Chile or Colombia have a 3% target, while Brazil's is even higher," Velarde indicated.
"Having a 2% target has also contributed to a more stable exchange rate," he stressed.
U.S. dollar falls in Peru in the 21st century
The BCR chief noted that the Peruvian sol has strengthened by nearly 5% against the U.S. dollar since 2000.
In that regard, Velarde underlined that hyperinflation harms a country's economy.
"To give you an idea, it was not until 2003 that we regained the per capita income level of 1967," he concluded.