Peru Maintains Interest Rate While Assessing Global Trade Risks

Peru’s central bank has held the interest rate at 4.75%, focusing on global trade war impacts amid rising inflation concerns. Although inflation rates are among the lowest in emerging markets, trade policies from the U.S. may affect Peru’s metal and fruit exports. Overall, a moderate economic growth is projected for this year.

On Thursday, Peru’s central bank maintained its key interest rate at 4.75%, a decision aligned with the expectations of seven out of eleven economists surveyed by Bloomberg. Four economists had anticipated a quarter percentage point reduction to 4.5%. Policymakers aim to assess the inflationary implications stemming from ongoing global trade conflicts.

The central bank acknowledged positive local inflation trends but expressed concern over increased global economic risks, attributing them to the heightened uncertainty associated with restrictive foreign trade measures. The statement highlighted significant volatility in financial markets as a consequence.

Peru boasts one of the lowest inflation rates among emerging markets and demonstrates economic growth that surpasses regional rivals. However, there are growing concerns that U.S. President Donald Trump’s trade policies could adversely affect Peru, particularly on metal and fruit exports that may face tariffs.

In February, the annual inflation rate in Peru decreased to 1.5%, with the central bank projecting a further reduction to approximately 1% this month. Furthermore, the bank anticipates a 3% growth in the economy for the current year.

Minister of Energy and Mines, Jorge Montero, revealed that Peru is preparing a delegation to prevent tariffs on copper. Agriculture Minister Angel Manero expressed skepticism regarding the likelihood of U.S. tariffs on Peruvian crops such as blueberries and grapes, but indicated willingness to appeal to the World Trade Organization if necessary.

In summary, Peru has upheld its interest rate while cautiously evaluating the influence of international trade disputes on its economy. Despite low inflation and robust growth, policymakers remain vigilant about potential tariff impacts on key exports. The ongoing monitoring of inflation trends and trade relations will be crucial in navigating the challenges posed by global economic uncertainties.

Original Source: www.livemint.com