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Julio Velarde on inflation: “The worst-case scenario is that it will fall and remain at 4%”

Julio Velarde, President of BCR. | Font: Andean

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Inflation picked up slightly last month, hitting 8.45% a year, according to the National Institute of Statistics and Informatics (INEI), while 1% to 3% would be ideal.

For the President of the Central Reserve Bank (BCR), Julio Velarde, is “unsustainable inflation” because it puts the country at risk of being left with a 6 percent price increase in a year.

Although BCR estimates that as of March 2023 inflation shows a strong decline and reaches the target range of 1% to 3% in the last six months of next year, there is a risk that this situation will not happen.

Velarde points out that central banks’ fears are not that inflation will not fall, but that it will remain at very high levels.

” worst case scenario is that it goes down and stays at 4%. This is a great fear. It’s not that it didn’t fall, but it didn’t fall enough,” Velarde said during his presentation at the American Chamber of Commerce in Peru.

According to the head of the BCR, for inflation to return to ideal levels in the second half of 2023, there must be a scenario in which food prices do not rise or fall slightly due to international trends, and energy prices do not rise.

With this in mind, Velarde also points out that it is not yet possible to say that BCR you will stop raising the interest rate, despite the fact that most of the adjustments have already been made, and adding that “decisions will depend on the data.”

Source: RPP

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