(Bloomberg) — Peru cut interest rates to the lowest level in a year and a half as inflation slows more than expected and the economy contracts.
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The central bank lowered its policy rate to 6.25% from 6.50% on Thursday, as expected by all 13 analysts surveyed by Bloomberg.
“Annual inflation is projected to continue its downward trend,” the bank said in its statement. “Risks associated to climate factors stemming from the El Nino weather phenomenon have fallen.”
Peru’s economy shrank 0.4% last year, according to economists’ estimates, due to a combination of bad weather and political turmoil. The country’s statistics agency will release full-year economic activity numbers next week.
The weak economy and mild impact from the El Niño weather pattern have helped inflation cool more than forecast in recent months. The annual inflation rate dropped to 3.02%, last month, fractionally above the central bank’s target range of 1% to 3%.
Finance minister Alex Contreras has said the economy is finally recovering from the downturn, adding that lower interest rates will help lift growth.
(Adds remarks from central bank’s statement in third paragraph)
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