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(Bloomberg) — Peru’s central bank held its key interest rate at 4.25% for a tenth straight month on Thursday, betting that an uptick in inflation will prove temporary.
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The decision matched all 12 forecasts in a Bloomberg survey of analysts.
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The Andean nation has had one of the lowest inflation rates in emerging markets in recent years. But annual consumer price rises have been above the upper limit of the target range since March, and last month accelerated to 4.01% as rising food costs add to the recent global energy shock.
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Policymakers are also monitoring inflation risks from the El Niño weather phenomenon, which could reach strong levels in the coming months and hit crop yields.
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Peru targets annual inflation of 2%, plus or minus one percentage point. Policymakers have said that inflation will slow toward its target as temporary pressures dissipate, although they also warned of longer-term threat posed by global conflict and the weather.
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“There is a risk that a stronger El Niño event and geopolitical tensions in the Middle East have more persistent effects on inflation,” the central bank said in a statement.
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Veteran central bank chief Julio Velarde, seen as a pillar of economic stability in the politically volatile nation, this week agreed to stay on for another term, likely extending one of the world’s longest tenures at the helm of a monetary authority. He was nominated by conservative president-elect Keiko Fujimori, whose five-year term starts on July 28.
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Peru’s Central Bank Chief Agrees to Extend 20-Year Run
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His nomination still needs to be confirmed by the senate.
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—With assistance from Rafael Gayol and Robert Jameson.
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(Updates with a statement from central bank in sixth paragraph)
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English (US)