Thursday, January 10, 2019

Peru holds rate, policy easy as economy below potential

     Peru's central bank kept its monetary policy rate unchanged at 2.75 percent, saying it appropriate to maintain an expansive monetary policy as long as inflation expectations remain anchored and economic activity remains below its potential.
     The Central Reserve Bank of Peru (BCRP), which has kept its rate steady since lowering it in March last year, added inflation is projected to remain within the target range and around 2 percent.
     Between May 2017 and March 2018 BCRP cut its key rate by 150 basis points. BCRP targets inflation of 2.0 percent, plus/minus 1 percentage point.
     In December Peru's inflation rate was largely steady at 2.19 percent compared with 2.17 percent in November but still at a 2018 high and in line with the central bank's 2.0 percent target.
     In its December inflation report, released earlier today, BCRP's forecast for inflation in 2019 was raised slightly to 2.1 percent from 2.0 percent forecast in September while inflation in 2018 was estimated at 2.1 percent, up from 2017's 1.4 percent. In 2020 inflation is seen averaging 2.0 percent.
     BCRP added that most indicators of business expectations had improved and were optimistic while economic activity continued to improve.
     In its latest forecast, BCRP maintained its forecast for the economy to expand by 4.0 percent in 2019, similar to growth in 2018, which was up from 2.5 percent in 2017.
     Growth in 2020 was also forecast at 4.0 percent.
     Peru's gross domestic product slowed in the third quarter to year-on-year growth of 2.3 percent from 5.5 percent in the second quarter when mining output and public works slowed.
    After sliding most of last year, Peru's sol has gained strength this year and was trading at 3.34 to the U.S. dollar today, up 0.9 percent this year but down 2.4 percent since the start of 2018.


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