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BCR raises its base interest rate to 6.5%, the highest level since 2009.

An increase in the reference interest rate means that the subjects of the financial system raise their interest rates. | Font: Andean

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The base interest rate of the Central Reserve Bank (BCR) rose again from 6% to 6.5%, the monetary institution said.

With this new rise reference interest rate It has been growing for 13 consecutive months and reached its highest level since January 2009.

The BCR board clarified that this interest rate hike is due to high inflation, which has started to decline from 8.81% to 8.74%, but is still above the target range.

“A significant increase Prices international energy and food prices since the second half of last year, exacerbated by international conflicts, have led to a strong increase in global inflation at a rate not seen in many years, and to levels well above central bank inflation targets. both in advanced economies and in the region,” the statement said.

BCR now forecasts that inflation will return to its target range of 1% to 3% in the second half of 2023, reversing previous estimates that indicated it would fall between the second and third quarters of next year.

The Monetary Authority says inflation is projected to be on a downward trend year-on-year due to easing impact Prices international food and energy prices, as well as lower inflationary expectations.

In addition, BCR indicated that for the rate update, it was taken into account that most leading indicators and expectations for the economy worsened in July and remain in the pessimistic range.

“Prospects for growth global economic activity they have been declining this year and next due to an expected shift in incentives in advanced economies, international conflicts and continued bottlenecks in the global supply of goods and services, despite some improvement in the past few months,” they added.

What effect does an interest rate increase have?

The base interest rate is used as a tool to control inflation, softening its growth.

An increase in the base interest rate implies that entities Financial system increase the interest rates that apply to the loans they offer.

According to the Peruvian Institute of Economics (IPE), if you want to stimulate economic activity, the base rate is reduced to create incentives for higher levels of credit and thus stimulate the economy given its direct impact on bank loans. while if the economy is overheated, the rate is increased to slow the economy down.

Source: RPP

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