Peru has maintained its key interest rate at 4.75% while assessing trade war impacts on inflation. Although inflation remains low at 1.5%, global economic risks have risen due to US trade policies. The government plans to negotiate against potential tariffs on exports, aiming to protect its economy.
Peru has opted to maintain its key interest rate at 4.75% as policymakers assess the potential inflationary effects stemming from global trade conflicts. This decision aligns with the expectations of seven out of eleven economists surveyed by Bloomberg, while four anticipated a reduction to 4.5%. The central bank acknowledged stable local inflation trends but expressed concerns regarding increased global economic risks due to uncertainties related to trade restrictions.
The central bank’s statement indicated heightened financial market volatility, reflecting the ongoing situation. Despite boasting one of the lowest inflation rates among emerging markets and strong economic growth relative to regional counterparts, authorities recognize the potential repercussions of US trade policies on Peru’s economy, particularly concerning metal and fruit exports.
In February, Peru’s annual inflation rate decreased to 1.5%, with the central bank projecting a further decline to around 1% this month. An economic growth forecast of 3% for the year has been reiterated. Jorge Montero, the Minister of Energy and Mines, announced that a delegation is being prepared to negotiate the avoidance of tariffs on copper. Meanwhile, Agriculture Minister Angel Manero expressed skepticism about the US targeting Peruvian agricultural products such as blueberries or grapes, although legal action through the World Trade Organization remains a possibility if necessary.
In summary, Peru’s decision to maintain its key interest rate is a strategic response to evaluate the impact of global trade tensions on inflation and economic stability. While local inflation is under control, the uncertainties pose risks that require careful monitoring. Peru’s proactive approach in addressing potential tariffs underscores its commitment to safeguarding its export markets and overall economic health.
Original Source: www.livemint.com
