LatinNews Daily - 10 February 2023

In brief: Peru pauses interest rate hikes

* Peru’s central bank (BCRP) has maintained interest rates at 7.75%, marking the first pause in over a year of consecutive monthly rate hikes. In a statement explaining its decision, the BCRP emphasised that “this pause does not necessarily imply the end of the cycle of interest rate rises”. However, it noted that annual inflation, which stood at 8.66% in January, is predicted to fall from March and return to the target range of 1-3% in the final quarter of this year. Significant challenges remain for the Peruvian economy, as was made clear by the International Monetary Fund (IMF) yesterday at the end of an Article IV mission to Peru. In its concluding statement the IMF said that President Dina Boluarte’s government will need to reach across the political divide to ensure economic stability amid nationwide anti-government protests. The IMF said that “recent political developments suggest that the government needs to work across the political spectrum to restore confidence, preserve stability, accelerate structural reforms to boost economic activity, and tackle inequality, poverty, and weaknesses in the education and health systems.” The IMF highlighted a number of challenges for Peru, including slowing growth, high inflation, political uncertainty, and the risk of spillover effects from Russia’s war in Ukraine. It predicted that economic activity will improve slowly, due in part to sluggish external demand and fertiliser shortages. 

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