Peru Holds Key Rate for a Fourth Month as Inflation Cools

Peru left borrowing costs unchanged for the fourth straight month as inflation finally begins to cool at rates policymakers have expected.

(Bloomberg) — Peru left borrowing costs unchanged for the fourth straight month as inflation finally begins to cool at rates policymakers have expected.

The central bank held its key interest rate at 7.75% Thursday, as forecast by all 13 analysts surveyed by Bloomberg.

Central bank chief Julio Velarde had said annual inflation would fall below 8% in April, and the official statistic came in at 7.97%. In a statement announcing the decision, the bank restated it can get inflation to 3% by the end of the year. It also repeated that future rake hikes are not ruled out. Velarde has warned in the past that he is wary of cutting interest rates too soon.

Read More: Peru Central Bank Chief Wary of Cutting Interest Rates Too Soon

The bank surprisingly paused its steepest-ever series of interest rate hikes in February, over fears that massive anti-government protests would hammer the economy. The protests led to two consecutive months of contractions in January and February, but the government now sees their impact in the rear-view mirror.

A likely El Nino weather pattern could also further disrupt the economy, although rains and flooding have eased in the past few weeks.

Both the central bank and the Finance Ministry expect a return to growth when Peru’s statistics agency publishes March economic activity figures next week.

Across Latin America, Brazil and Chile have also halted monetary tightening cycles, while Mexico and Colombia have continued to raise interest rates at recent meetings.

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