Peru Seen Lifting Key Rate for a Sixth Month: Decision Guide
Peru is forecast to raise interest rates for a sixth straight month on Thursday as inflation surges amid one of the world’s strongest recoveries from the pandemic.
The central bank will increase its policy rate by half a percentage point to 3% according to five of seven analysts surveyed by Bloomberg. Two economists expect a bigger increase, to 3.25%.
Policy makers in Brazil, Mexico, Colombia and Chile have also been withdrawing stimulus as inflation accelerates above target across all the region’s major economies. As economies eased controls intended to curb the pandemic, pent-up demand pushed prices higher, aggravated by rising global food and energy costs.
In Peru, annual inflation accelerated to a 13-year high of 6.4% in December, led by food and energy costs. The central bank targets inflation of 2%, plus or minus one percentage point.
What Bloomberg Economics Says
“Forward guidance should continue to show the central bank plans to slowly increase rates, keeping expansionary monetary conditions for a prolonged period. Inflation risks are biased to the upside, so the tightening cycle could be faster and/or longer than the central bank anticipates.”
-- Felipe Hernandez, Latin America economist.
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The economy grew 12.6% last year, the fastest pace in Latin America, according to estimates by economists surveyed by Bloomberg, despite political volatility and a contested election.
In December, conservative opposition lawmakers tried to start impeachment proceedings against President Pedro Castillo, but failed to get enough votes in congress.
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