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Peru’s Inflation Slows Sharply in June After Economy Cools

Inflation in Peru’s capital slowed sharply in June as its economy cooled more than initially expected due to political instability.

Consumer prices in Lima in June rose 6.46% from a year earlier, compared to the 6.92% median forecast of economists surveyed by Bloomberg. In May, annual inflation had reached 7.9%.

Peru’s central bank uses the capital area as representative of inflation nationwide.

On a monthly basis, consumer prices fell by 0.15%, according to statistics agency INEI, while economists surveyed by Bloomberg expected prices to rise 0.2%.

Read More: Peru’s Growth Falls Short of Even the Most Pessimistic Forecast

It’s the first time this year that Peru’s benchmark interest rate, currently at 7.75%, is higher than inflation. The central bank has held borrowing costs at a 22-year high for the past five months, following its steepest series of hikes ever.

Central bank chief Julio Velarde has said he is reluctant to cut interest rates too early, in case inflation were to pick up again. He does not expect inflation to fall back to the central bank’s target range of between 1% and 3% until next year.

Source : Yahoo