Peru central bank holds interest rate at 7.75%, warns of climate risks (updated)

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11/08/2023 24:26

(Adds details on decision)
       Aug 10 (Reuters) - Peru's central bank on Thursday kept
its benchmark interest rate unchanged at 7.75% for the seventh
consecutive month, as the monetary authority in the Andean
nation attempts to bring inflation closer to its target rate.
    The central bank first held the rate steady in February
following an aggressive series of hikes that began in August
2021.
        The central bank said that a downward trend in
year-on-year inflation is expected to continue in the coming
months, nearing the target range by the end of this year and
reaching it by early 2024.
  
        It cited moderating effects of international food and
energy prices and prior supply shocks in the agricultural
sector.
  
        "However, there are risks associated with climatic
factors," the bank said. 
  
        "Shocks linked to social conflicts and the El Niño
phenomenon on the coast have had an bigger than expected impact
on economic activity and internal demand."
  
        Peru, the world's No. 2 copper producer, has been among
the fastest-growing economies in the region but waves of social
unrest following the ouster of former President Pedro Castillo
late last year have come at a cost.
  
        Peru's annual inflation rate 
    slowed sharply to 5.88% in July
    , even as its monthly rate rose to 0.39% from June.
  
        Adrian Armas, the head of the bank's economic studies,
said earlier this month that seasonal factors, such as a "more
intense" El Niño will likely continue to push up inflation
albeit at a slow pace.
  

 (Reporting by Carolina Pulice and Marion Giraldo; Editing by
Sarah Morland)
 ((Carolina.Pulice@thomsonreuters.com;))