Moody’s: Here’s what the rating agency thinks about keeping the restrictive interest rate in Peru

A few days ago, the Central Reserve Bank (BCR) confirmed that reference interest rate remained at 7.75% second month in a row. Correction of the figure will depend on inflation indices register in the country in the coming months.

The decision prompted a comment from Moody’s, which backed the decision despite the fact that the CPI fell slightly in the latest INEI report.

“Monetary policy should remain restrictive because there is a global trend and in Peru we see that inflation will gradually come down; rather, to slow down,” said Jaime Reusche, vice president and senior credit officer at Moody’s.

A few days ago, Julio Velarde, president of BCR, stated that “the worst-case scenario for the central bank is to cut the interest rate only to raise it again two or three months later. We must be sure that inflation is beaten.”

Factors affecting the economy of Peru

Since December last year, various social conflicts have been raging in Peru, and when they subsided, problems with the weather began. According to Reusche, these shocks do not allow inflation to decrease or be controlled.

“As a result of this, his monetary policy was properly prudent (to keep it at 7.75% for three consecutive months),” he said. In addition, he added that maintaining this rate is a step before the economy recovers, since inflation must first be controlled and then business activity should be stimulated.