Peru holds rate steady, sees inflation converging to 2%

By www.CentralBankNews.info     Peru’s central bank maintained its policy rate at 4.25 percent as inflation recovers from supply-side shocks and economic growth remains close to potential.
    The Central Reserve Bank of Peru (BCRP), which has held rates steady since April 2011, said it expects inflation to converge towards 2.0 percent in coming months due to improvements in the supply of foods and productive activity that is close to potential in a generally weak economic environment.
    Peru’s headline inflation rate fell to 2.45 percent in February from January’s 2.87 percent, primarily reflecting a decline in food prices, the central bank said.
    The underlying annual inflation rate was 3.22 percent in February and inflation excluding food and energy was 2.20 percent, the bank added.
    Peru’s Gross Domestic Product expanded by only 0.6 percent in the fourth quarter from the third quarter for an annual rate of 5.9 percent, down from the third quarter’s pace of 6.8 percent.
    The BCRP targets annual inflation of 1.0-3.0 percent.
 
    www.CentralBankNews.info

Thursday, February 7, 2013

Peru holds rate steady, sees inflation converging to target

  Peru’s central bank kept its policy rate steady at 4.25 percent, saying inflation is expected to converge toward the bank’s 2.0 percent mid-point target in coming months, reflecting improved supply of food and economic activity that is close to its potential during a time of weak global output.
  The Central Reserve Bank of Peru (BCRP), which has held rates steady since April 2011, also said the country’s economy had stabilized around its sustainable, long-term level of activity although sectors that depend on external markets remain weak.
 Peru’s inflation rate rose to 2.87 percent in January, up from December’s 2.65 percent, still within the central bank’s target range of 1.0-3.0 percent.
  Peru’s Gross Domestic Product rose by an annual rate of 6.5 percent in the third quarter of 2012, up from 6.3 percent in the second quarter.
  At its previous meeting in January, the central bank also said it expects inflation to converge toward its 2.0 percent target.

The central bank has said it expects inflation to merge toward 2 percent this year, and it now seems more worried about the effect of the wobbly global economy on Peru’s swift expansion than about rapidly rising prices.

Peru’s potential growth rate, the maximum rate the economy can expand without provoking excessive inflation, is normally seen around 6 percent or 6.5 percent.

The government has said Peru’s economy probably expanded 6.3 percent in all of 2012. A similar pace is expected this year.

The central bank has described its current monetary stance as slightly tighter than neutral. It has raised bank reserve requirements six times since May to soften the impact of heavy capital inflows on the local currency and to steady a quick credit expansion.

The country is a top exporter of minerals, which drive some 60 percent of its international shipments. Exports have slumped in recent months, and domestic lending, consumption and construction are now fueling the country’s economic expansion.
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