:quality(85)//cloudfront-us-east-1.images.arcpublishing.com/infobae/H2CJHLGKYRHZ7PZ4JCFLI7QTA4.jpg "BCR expects lower inflation expectations for the rest of the year 1")
The central director of Economic Studies of the Central Reserve Bank (BCR)Adrián Armas, predicted that the expectations of inflation in the Peruvian economy fall in the rest of the year because the external pressures have disappeared.
BCR would raise interest rates again on Thursday to contain inflation in Peru
The monetary authority would raise the benchmark interest rate by 25 basis points to 8.00% at a board meeting this week, according to Scotiabank’s economics department.
“A reduction in inflation expectations is expected for the rest of the year (…) there is price stability. By no means do we see the upward pressures that we saw when the cycle of high inflation rates was born,” he said on a conference call held by the RBC.
Adrián Armas explained that there is a downward trend in fuel prices around the world, as well as some food products. Therefore, he stated that it is planned for this year a normalization scenario agricultural production conditions, which includes better access to inputs and fertilizers, although other specialists have indicated that March production will already be affected because the agricultural campaign has gone with shortage of urea.
He also said that the Central Bank’s projection is a downward trend in year-on-year inflation since next March, and expects it to return to the target range in the fourth quarter of 2023.” This projection is based on moderating the spectrum of international food and energy prices,” he said.
Armas Rivas underlined that the decision to maintain the position of the RBC to stop the rise in Reference rate in March, it will depend on the indicators presented in February.
Business expectations in Peru continue to deteriorate due to protests
The Central Reserve Bank of Peru, in its latest report, estimated that the Peruvian economy will grow between 2.1% and 2.8% in 2023. While inflation continues to rise.
“The monetary policy rate decision in March will be in line with information we will see in February. In January, signs of the trend inflation rate eased, to the point that in the first month the rate was 0.23%, the lowest since February of last year,” he said.
Regarding the protests and blocked roads, the director of the issuing entity indicated that the drop in tourist entries to Peru will generate a loss of $600 million during the first half of the year.
BCR stops raising interest rates after 18 consecutive months of upward trend
The board of directors of the monetary entity decided to maintain the reference rate at 7.5% in February. However, he clarified that this pause does not necessarily imply the end of the upward cycle of this indicator.
“The economy is interdependent as a whole (…) the sales indicators that we have seen (show) strong falls in Puno, Cusco and Madre de Dios. All this leads to a situation where the economy is facing a large negative shock and the southern zone affects confidence in the rest of the country,” he said.
In this line, he indicated that in the southern regions there is a greater deterioration in the regional business confidence indicators.
On the other hand, he pointed out that the sol has been one of the few currencies of emerging countries that has remained relatively stable in the cycle of inflation rate high in the world.
“The sol was one of the very few emerging market currencies that held a relatively stable value against the dollar during the cycle of high inflation rates. Very few emerging economies can say that,” said Adrián Armas.
He explained that This is due to the fact that Peru, despite all the problems it presents, maintains a fairly strong and resilient macroeconomics, both in the fiscal part, the regulatory part and in monetary policy. “It also allows inflation in Peru to be one of the lowest in the region,” he said.