Lower interest rate does not ensure the country's growth, says Central Bank of Peru

Lower interest rate does not ensure the country's growth, says Central Bank of Peru

The president of the Central Bank of Peru, Julio Velarde, said this Thursday that reducing the interest rate does not define the growth of the economy in the country, days after the minister of the sector asked the head of the monetary organization be more proactive to reactivate the country that entered recession last year.

Velarde stated in an economic forum that for monetary policy to be more effective It is vital that Peru's potential growth rate increases, that does not generate inflationary pressures, which in recent years has been reduced up to 2.5% mainly due to a drop in investment.

“If potential growth is not raised, the margin for countercyclical monetary policy is limited”, he stated at an event organized by the local newspaper El Comercio. “It would be very easy to believe that growth can be achieved by lowering interest rates.”he added, without referring to the Minister of Economy, José Arista.

Minister Arista said last week that the central bank's current reference interest rate level of 5.75%, It is “quite high” and esp “does not help reactivate the economy as quickly as we would like.”

Velarde stated at the forum that the interest rate in Peru is the lowest among the most important economies in Latin America and that even It is below more developed economies such as the United States, Japan and Canada.

“I have not had nor do I have any confrontation with the Minister of Economy, nor do I plan to have one, and it seems really painful to me to even be arguing with the minister”Velarde said, seeking to settle a controversy with the head of the sector.

The head of the central bank stressed that Peru's growth has slowed in recent years, after registering an “exceptional period” of expansions from 2005 to 2013, from 6.6% to 3.1%. “Now we are growing at a rate (average) in the last four years slightly above 1%,” she said.