Peru expected to hold key rate

Bnamericas Published: Friday, May 09, 2014

The key interest rate in Peru is not likely to move anytime soon, according to Capital Economics.

As widely expected, the central bank board left the benchmark interest rate unchanged at 4% on Thursday for the sixth month in a row.

Despite a slowdown in the Peruvian economy, Capital Economics does not see any room for "aggressive monetary easing" during the coming 18 months, with a large current account deficit and inflation running above the 1-3% target.

The London-based research firm said that it expects only a small policy rate cut of 25 basis points this year, and that the central bank will likely continue using other mechanisms to stimulate the economy, such as reducing banks' local currency reserve requirements.

The central bank recently cut its 2014 GDP growth estimate to 5.5% from 6%, while Capital Economics sees 5% growth this year.

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