Central Reserve Bank raises base interest rate to 6.75%

The Board of the Central Reserve Bank (BCR) raised its benchmark interest rate by 25 basis points, to 6.75%, in line with the normalization of the monetary policy stance, the issuing institution said on Thursday.

In making this decision, the board considered that the twelve-month inflation rate declined from 8.74% in July last year to 8.4% in August last year, still above the country’s target range “due to significant increases in food prices and fuel.”

BCR He added that the twelve-month inflation rate without food and energy also fell from 5.44% in July to 5.39% in August, also still above the upper end of the inflation target range.

Consideration was also given to the significant rise in world prices for energy and food since the second half of last year, exacerbated by international conflicts.

This has led to “strong growth in global inflation on a scale not seen for many years, and to levels well above inflation targets in central banksfrom both advanced economies and the region,” the issuing bank said.

He also indicated that inflation is projected to be on a downward trend year-on-year with a return to the target range in the second half of next year due to the moderate impact of world food and energy prices, as well as lower inflation expectations.

In this sense, 12-month inflation expectations fell from 5.16% to 5.10% between July and August, still above the upper end of the inflation target range, while various leading indicators and expectations for the economy rebounded in August, but most remained the same. pessimistic section.

Forecast of low economic growth

BCR took into account that the prospects for growth in global economic activity this year and next have deteriorated due to the expected removal of stimulus in advanced economies, international conflicts and the persistence of global bottlenecks in the supply of goods and services, despite some improvement in recent months.

In this regard, the board assured that it is “particularly attentive” to new information about inflation and its determinants, including the evolution of inflation expectations and economic activity, in order to consider additional changes in the monetary policy stance.

In this sense, he reaffirmed his commitment to taking the necessary measures to ensure that inflation in the country returns to the target range in the forecast horizon and announced that at his next meeting, scheduled for October 6, he will return to assessing the monetary program.

(As reported by EFE)