LIMA: Peru's central bank chief said on Friday there is no reason to adjust monetary policy for now, as he reiterated that inflation will cool to 3 percent by the end of this year.
Although food prices have spiked in recent weeks, mainly because of external supply shocks, inflation is still expected to ease to the upper end of the central bank's 1 to 3 percent annual target in the next few months.
Consumer prices in the 12 months through August were up 3.53 percent, compared with 3.28 percent in the 12-month period through July.
"We don't see factors that would prompt us to change current monetary policy for the time being," Central Bank President Julio Velarde told reporters.
The central bank has held its base rate steady at 4.25 percent for the last 16 months, though it has tightened bank deposit requirements twice to slow the pace of credit expansion and curb a rally in the country's currency, the sol, which is trading at a 15-year high of 2.59 per dollar.
Velarde also said the country's banking regulator has drafted a norm that would curb new mortgage loans denominated in dollars, which carry lower interest rates than ones in soles but come with foreign exchange risk. Many Peruvians are paid in soles but owe debts in dollars. About half of all the country's bank deposits are denominated in dollars.
Mortgage disbursements in soles and dollars both grew more than 20 percent in July in Peru. Dollar mortgages may become even more affordable after the Federal Reserve announced new stimulus measures this week to boost the US economy.
Velarde said banks had requested the new norm.
"They agree that there should be a rule to prevent or minimize high growth in dollar mortgages, because they know it's a risk," Velarde said.
Hugo Perea, economist at BBVA in Lima, said mortgages comprise about 4.5 percent of Peru's gross domestic product, one of the lowest rates in the region.
"I think they're worried more about the speed with which mortgages are growing than their size," Perea said. "I think Peru is pretty well placed to get the hot money coming out of the US and Europe now."
WIDER FISCAL SURPLUS, WEAKER EXPORTS
In its quarterly outlook, the central bank raised its forecast for the public sector fiscal surplus this year to 1.5 percent of GDP, higher than the 1.1 percent it forecast previously.
The fiscal surplus in the first half of the year was a whopping 7 percent as strong economic growth lifted tax receipts ahead of an expected increase in government spending in the second half.
Domestic demand is expected to expand 7.1 percent this year, higher than the 6.3 percent forecast in the central bank's previous quarterly report.
It expects the economy to grow 6 percent this year and next, even though exports have slipped for the last few months on lower prices for Peru's minerals. Peru's economy is on track to grow more quickly than its South American peers this year.
On Tuesday, the central bank trimmed its view for the 2012 trade surplus to $3.5 billion from $6.7 billion. That has contributed to expectations of a wider current account deficit, now seen at 3.9 percent of GDP.
Comments
Comments are closed.