Peru Maintains Key Interest Rate Amid Trade War Concerns

Peru’s central bank maintained its interest rate at 4.75% as policymakers assess the impact of global trade wars on inflation. The bank acknowledged improving local inflation but noted rising global risks. With a current annual inflation rate of 1.5%, the bank expects further cooling and projects a 3% economic growth rate for this year.

On Thursday, Peru’s central bank decided to maintain its key interest rate at 4.75%. This decision aligns with the expectations of seven out of eleven economists surveyed by Bloomberg, while four economists had projected a reduction to 4.5%. Policymakers aim to assess the inflationary ramifications stemming from ongoing global trade disputes.

The central bank acknowledged improving local inflation trends but expressed concerns about increasing global economic risks. They cited considerable uncertainty linked to restrictive trade measures, resulting in notable financial market volatility, as indicated in their official statement.

Despite maintaining one of the lowest inflation rates among emerging markets, combined with robust economic growth, Peruvian authorities recognize potential implications from U.S. trade policies introduced by President Donald Trump. If tariffs are imposed, metal and fruit exports could be adversely affected.

In February, annual inflation in Peru decelerated to 1.5%, with expectations to decrease further to approximately 1% this month. The central bank projects an economic growth rate of 3% for the current year.

Energy and Mines Minister Jorge Montero revealed plans for a diplomatic delegation to mitigate potential tariffs on copper exports, while Agriculture Minister Angel Manero expressed optimism that U.S. tariffs would unlikely target Peruvian agricultural products, such as blueberries and grapes. However, he noted potential actions before the World Trade Organization in response to such developments.

In conclusion, Peru has opted to keep its interest rates steady amid rising global trade uncertainties. The central bank recognizes both positive local inflation trends and potential risks from U.S. trade policies, considering their impact on the economy and various sectors. While Peru’s inflation remains manageable, officials are proactively preparing to address potential tariff implications for key exports.

Original Source: www.livemint.com