Peru Central Bank Continue To Hold Key Rate Steady

The Central Bank of Peru has held steady the benchmark interest rate for the fifth month in a row at 3.25 percent after the economy shows signs of recovery and inflation quickened.

In January this year, the bank lowered the benchmark interest rate to counter a slowdown that lasted for one year. Analysts said the losses of sol against the dollar have kept the Central Bank of Peru from lowering the rate again.

The bank said in a statement that national inflation has been affected by temporary supply factors that have been responsible for the reversal more gradually than expected. The bank also commented that an economic recovery is underway. The economy of Peru posted impressive numbers in March to exceed the expectations of government and analysts. The economy witnessed growth by 2.68 percent to massively surpass the forecasted growth of 2.15 percent. The agricultural sector and financial service sector rose by 1.16 percent and 12.11 percent, respectively.

Alonso Segura, Head of the Economy and Finance Ministry, announced that there will be more investments in infrastructure in the country and not mining so that a significant effect on the national productive activities can be seen in 2016.

On May 30, the central bank announced it was cutting its local currency bank reserve requirements to 6.50 percent by 50 basis points, effective June 1. This was done to improve liquidity of the country’s currency in the money markets and stimulate credit growth.

In a statement, the Central Bank of Peru had remarked that this action would inject approximately 251 million soles ($79.85 million) into the country’s financial system. The bank had further remarked that local currency loans to the private sector in the month of April had jumped 22.1 percent against the previous year, while there was a reduction of 7.8 percent for dollar loans during the same period. On May 27, the central bank sold $5 million in the local spot market and the sol currency weakened 0.06 percent to close trading at 3.154/3.155 per dollar.

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