Velarde Says Can Use Reserves to Protect Currency
Peru central bank President Julio Velarde said officials could use reserves to prevent excessive depreciation of the nation’s currency.
“We have double the reserves we had at the start of this government and we are prepared to use them” in order “to avoid an excessive depreciation, excessive volatility,” Velarde said in an interview today in Porto, Portugal. “We’re not going to go against the trend, but a very strong depreciation would hurt us.”
Peru’s sol has weakened about 9 percent in the past six months as the global financial crisis dissuades investors from investing in riskier markets and the currencies of Brazil and Mexico have fallen on concerns about the impact of the U.S. recession.
Peru’s international reserves amounted to $29.6 billion in the week ending Feb. 17, according to data from the central bank.
Velarde said he expected inflation to end the year at around 2 percent and there may be room to cut interest rates further. The central bank, which meets this week to set rates, cut its benchmark lending rate Feb easy online payday loans. 5 by a quarter percentage point to 6.25 percent.
“There’s quite a lot of room if inflation falls,” he said. “We are prudent, we are conservative, we are central bankers.”
Velarde said there was “very little” impact on inflation from the weakness of the currency as it was offset by a decline in world commodity prices.
Vigorous Spending
“The problem is growth, exports have been hit, but even so we think we’ll grow almost 5 percent,” he said. “Fortunately private spending still remains vigorous.”
Peru’s economy posted the slowest growth in more than two years in the fourth quarter as manufacturing, fishing and electricity output slumped. Gross domestic product grew 6.6 percent from a year earlier, down from 10.7 percent growth in the third quarter, the country’ National Statistics Institute reported Feb. 27.
Filed under: technology by Forest