reserve bank of peru

Peru’s central bank caught economists by surprise on Thursday night when it raised its benchmark lending rate from 3 to 3.25 per cent on inflation concerns arising from “international” price rises.

Amid strong inflows of “hot money” that have pushed the Nuevo Sol to a two-year high of about 2.8 per dollar, the seven-member bank board had been holding rates at 3 per cent for the past three months.

The bank said the increase of 25 basis points was now warranted as “a preventive measure” against “the dynamism of domestic demand in an environment of international increases in food and energy prices”. While inflation stood at 2.08 per cent this month, well within the Bank’s target range of 1 per cent to 3 per cent, Peruvians are understandably touchy on the subject, having lived through hyperinflation in the mid-80s.

 Read more