Peru again cuts interest rate as inflation eases

By Kylie Madry

(Reuters) – Peru’s central bank on Thursday cut its interest rate by 25 basis points to 6.75%, in line with expectations and as the speed of price increases in the Andean nation comes under control amid a recession.

The monetary authority signaled in a statement that the rate cut did not necessarily imply more would follow.

The central bank’s fourth-consecutive cut comes as Peru’s annual inflation rate slowed to 3.64% in November, nearing the upper end of the bank’s target range of 1% to 3%.

“Annual inflation is projected to reach the target range within the next few months,” the central bank said.

Annual core inflation, which strips out some volatile items such as food and energy, is projected to come within target by the end of 2023, the bank added.

“This would be explained by the moderation of international price effects on several items, the reversal of supply shocks in the agricultural sector and the expectation of reduced inflation,” the monetary authority said.

“However, there are risks associated with climatic factors coming mainly from the El Nino weather phenomenon.”

Peru, the world’s No. 2 producer, has been battling a technical recession this year on the adverse impacts of El Nino, lower private investment and lingering effects from social conflicts sparked late last year.

The government has since announced a slew of measures meant to kickstart the economy.

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