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Peruvian central bank President Julio Velarde said the bank is ready to tighten monetary policy if it sees domestic demand fueling inflation.
The bank will raise either its benchmark interest rate or reserve requirements if demand pressures increase, Velarde told reporters in Lima today.
The bank boosted reserve requirements for the first time in a year on May 1 as credit growth and an improved economic outlook risk fueling inflation that’s been above the target of 1 percent to 3 percent for 10 months. While growth accelerated to 6 percent in the first quarter from 5.5 percent in the previous three months, it remains below potential, Velarde said.
“Have no doubt that if we see inflation stemming from demand pressures, which we don’t yet, we will act to adjust monetary policy,” Velarde said. Raising interest rates or the reserve ratio “have the same effect,” he said.
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