Peru interest rate continues to rise

Peru’s central bank has extended its biggest-ever phase of monetary tightening in an attempt to curb a spike in inflation. The bank raised its benchmark rate by 0.25 percentage points to 7.75%, the highest level in more than two decades. This decision was in line with expectations and is the bank’s 18th straight rate increase.

Policymakers are struggling to get inflation back under control, but their task is being complicated by mass unrest in the nation. Annual inflation is still more than four times the midpoint of the bank’s target range, despite slowing slightly from its June peak. The central bank has stated that moderation in global food and energy prices, and falling inflation expectations, will help this trend.

The violent turmoil in recent weeks has blocked key highways and left at least 40 dead. Demonstrators are demanding the resignation of President Dina Boluarte, who took office just a month ago, and for new elections to be called immediately.

Annual inflation was little changed at 8.46% in December, surprising analysts who had expected it to slow. Consumer price rises have cooled slightly from a 25-year high in June, but remain far above the central bank’s target range of 1% to 3%.

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