By CentralBankNews.info
Peru’s central bank raised its benchmark monetary policy rate by a further 25 basis points to 4.0 percent and said it would consider further rate hikes to ensure that inflation moves towards its target range.
The Central Reserve Bank of Peru (BCRP), which raised its rate by 50 basis points last year, most recently in December, said its rate hike took into account that inflation expectations are above its target range, that economic activity is recovering along with the mixed international indicators.
Peru’s consumer price inflation rate rose to a 2015-high of 4.4 percent in December from 4.17 percent in November, with inflation excluding food and energy up to 3.49 percent from 3.46 percent.
The BCRP targets inflation of 2.0 percent, plus/minus 1 percentage point.
Inflation has been fueled by the depreciation of the sol. Since mid-2014 the sol has been falling and last year it depreciated by 12.2 percent against the U.S. dollar.
So far this year, the sol’s decline has tempered and it was trading at 3.43 to the dollar today, only slightly below 3.40 at the start of the year.
Peru’s Gross Domestic Product expanded by an annual 2.9 percent in the third quarter, marginally below the 3.0 percent seen in the second quarter, and the central bank said recent data show higher growth in the fourth quarter of 2015, although it remains below the country’s potential.
For 2016, the BCRP estimates that the economy will be growing around its potential rate.
In addition to the monetary policy rate, the central bank said it was raising the overnight deposit rate to 2.75 percent along with the rates for temporary purchases of securities and credit regulation.