(Bloomberg) — Peru unexpectedly cut its benchmark interest rate Thursday, shrugging off concern that core inflation remains stubbornly high and that the economy is already growing faster than expected without the need of monetary policy support.
The central bank lowered its benchmark rate by a quarter-point to 5.5%, as forecast by four of 10 analysts surveyed by Bloomberg. The other 10 had expected the bank to hold rates at 5.75%.
Policymakers have been fretting about core inflation — price increases excluding food and energy costs — as it has hovered around 3% annually since February without cooling down. Meanwhile, overall inflation has slowed to 2.13%, close to the midpoint of the central bank’s target band.
“Core inflation in July showed less persistence than in previous months,” the central bank said in a statement accompanying the interest rate decision. The bank also said that headline inflation should continue to fluctuate around 2% for the foreseeable future, while economic indicators are seen in positive territory for the third straight month.
Peru’s inflation is the lowest among its peers, and its policy rate is also the lowest — tied with Chile — among Latin America’s major economies. Under central bank President Julio Velarde, Peru has cut rates from a high of 7.75% starting in September of last year and slashed inflation from a high of 8.81%.
Earlier Thursday, Mexico’s central bank cut its benchmark interest rate for the first time since March — by a quarter-point to 10.75% — and said it would consider additional reductions as policymakers look past the recent inflation spike to focus on threats to economic growth.
Economic activity has been beating expectations, putting less pressure on the independent central bank to cut rates. The economy expanded over 5% in both April and May. Still, Finance Minister Jose Arista said last month that the “only problem” he was seeing was that the central bank was not cutting rates fast enough.
Despite Arista’s complaints, which he has made repeatedly this year, President Dina Boluarte has said she is optimistic that growth at the end of 2024 will surpass the government’s initial forecast of 3.1%.
–With assistance from Rafael Gayol.
(Updates with statement from central bank in fourth paragraph)
©2024 Bloomberg L.P.
Source link : http://www.bing.com/news/apiclick.aspx?ref=FexRss&aid=&tid=66b56e4fa748414ca67b4c10838086ec&url=https%3A%2F%2Fwww.bnnbloomberg.ca%2Finvesting%2F2024%2F08%2F08%2Fperu-surprisingly-cuts-rate-shrugging-off-core-inflation-worry%2F&c=12471660759841797427&mkt=en-us
Author :
Publish date : 2024-08-08 13:04:00
Copyright for syndicated content belongs to the linked Source.
