Peru’s central bank has held its key rate at 3.25% for the fifth consecutive month citing weak economic growth and growing inflation.
“The most recent indicators of economic activity as well as business and consumer expectations continue to demonstrate an economic cycle with GDP growth rates below potential,” read a statement from the central bank. It also cited mixed signals from the global economy and high volatility and finance and currency markets.
Peru’s GDP grew at 1.6% in the first quarter of this year, down from 5.8% over the same period last year. Annualized inflation through May grew to 3.4% due to higher prices of electricity and fuel, above the central bank’s target of 1% to 3%.
Rising inflation and the weakening nuevo sol, which is trading at a six-year low, are limiting the government’s options to spur consumer demand in a sluggish Peruvian economy. The central bank has aggressively cut banks’ reserve requirements, which now sits at 6.5%, to free up money for lending.
The news led to a slight drop in the value of the nuevo sol, which fell from 3.154 to 3.155 per dollar in trading today.
BCR decidió mantener su tasa de referencia en 3,25% (El Comercio)