Peru lifts key rate half-point to 5.5 percent

Bloomberg

Peru raised borrowing costs for an 11th straight month with a half percentage point interest rate hike to curb the fastest inflation in a quarter century, which triggered rioting in the recent months.
The central bank increased its policy rate to 5.5% from 5%, in line with forecasts. The new rate is the highest since 2009.
Central banks across Latin America are tightening policy as their economies are hit by soaring global food, fuel and fertilizer costs, aggravated by Russia’s invasion of Ukraine. Policy makers in Brazil, Mexico, Colombia and Chile also raised rates at recent meetings.
“The significant and continual increase in global food and energy prices since the second half of last year, accentuated by international conflicts, has brought a strong increase in global inflation at levels not seen in many years in advanced economies and in the region,” the bank said in its statement.
Peru’s Finance Ministry said this month that it will make emergency payments to
the most vulnerable citizens
to help them cope through
the bout of inflation, and the government is also making
donations of food.
The Ministry of Agriculture has also been trying to source supplies of fertilizers before the major planting season in August, with the shortage threatening to worsen food inflation by forcing farmers to slash the amount of crops they plant. The International Monetary Fund’s World Fertilizer Index has more than tripled this year.
However, a ship with 45,000 tons of fertilizers that arrived this week will ease the shortage for 45 days. Next week the government will publish surveys of farmers, which will shed more light on the size of upcoming harvests and food inflation.
The economy will grow 3% this year, according to the International Monetary Fund. The economic outlook is clouded by an ongoing political crisis that saw four cabinet members replaced last month, including the ministers of mining and agriculture. President Pedro Castillo is currently being investigated by both congress and the national prosecutor’s office.