The Central Reserve Bank of Peru reduced the reference interest rate to 5 percent this Thursday, matching analysts’ expectations of a quarter of a percentage point (0.25 points).
Peru has one of the lowest benchmark interest rates in Latin America, and the central bank said in a statement that future rate changes will depend on inflation data and its determinants.
The cut came after consumer prices in the Andean nation fell for the second consecutive month in October, down 0.09 percent from the previous month, while annual inflation stood at 2 percent.
The monetary authority said that “annual inflation and core inflation are expected to remain within the target range over the projected horizon,” but added that it sees a slight temporary increase in the annual rate.
The rate cut was also expected after the bank’s chief economist, Adrián Armas, said last month that inflation developments in Peru should lead to a series of “gradual” interest rate reductions.
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How do the perspectives of the Central Bank and financial analysts differ regarding the future trajectory of interest rates and inflation in Peru?
Welcome to World Today News! Today we have two guests, Mr. Juan Carlos Darias, an economist from the Central Bank of Peru, and Ms. Maria Fernanda Espinosa, a financial analyst from a leading investment firm in Lima. Thank you both for joining us today.
Mr. Darias, could you start by telling us about the reasons behind the decision to cut Peru’s reference interest rate by 0.25 percent to 5 percent this week? What were the main factors that influenced this decision, and what was the rationale behind matching analysts’ expectations?
Ms. Espinosa, as a financial analyst, what is your take on this rate cut? Do you think it was the right decision, given the current economic climate in Peru? How do you see this move impacting the domestic financial market and investor confidence?
Mr. Darias, could you elaborate on the statement mentioning that future rate changes will depend on inflation data and its determinants? How does the Central Bank of Peru plan to monitor inflation moving forward, and what kind of scenarios are being considered in terms of future interest rate changes?
Ms. Espinosa, do you agree with the Central Bank’s assessment that annual inflation and core inflation are expected to remain within the target range over the projected horizon? What factors might contribute to this prediction, and which ones could potentially disrupt it?
Mr. Darias, earlier this year, there were concerns about a possible rise in inflation due to the increase in oil prices and the effects of COVID-19 on the global economy. How has the situation changed since then, and what measures have been taken by the Central Bank to ensure price stability in Peru?
Ms. Espinosa, what are the potential risks associated with keeping interest rates at such low levels for an extended period? How might this affect Peru’s economic growth and stability in the long run?
both guests, do you think that Peru’s benchmark interest rate is likely to remain one of the lowest in Latin America, or are there any signs that other countries may also adopt similar policies in the near future?
Thank you both for your insights and expertise. This concludes our interview on the recent interest rate cut by the Central Bank of Peru.
