World Economy

Peru CB Hikes Key Rate

Peru CB Hikes Key RatePeru CB Hikes Key Rate

Peru’s central bank raised the benchmark interest rate for the third straight month on Thursday and warned that rising inflation expectations threatened to trigger a feed-back loop of quickening price hikes. A majority of analysts polled by Reuters had forecast an increase of the key rate by 25 basis points to 4.25% after the annual inflation rate rose to a fresh four-year high of 4.61%, well above the bank’s 1 to 3% target range. The central bank said that recent price spikes were driven by temporary supply factors but had seeped into the market’s outlook. “These increases in consumer prices have affected inflation expectations, placing them above the target range, which can feed back into inflation,” the central bank said in a statement. The inflation expectations of analysts polled by the central bank have risen to 3.5% for 2016 and 3% for 2017. The central bank has raised the interest rate four times in the past six months.