Julio Velarde foresees stable inflation and highlights economic challenges in Peru.

In a recent statement before the Budget Commission of Congress, the president of the Central Reserve Bank of Peru (BCR), Julio Velarde, anticipated that the annual inflation rate for September could be at levels similar to or even below the 2.03% recorded in August. This forecast reflects a certain stabilization in the Peruvian economy, which has faced significant challenges in terms of inflation in recent years.

Velarde indicated that, despite expectations of a slight increase in inflation in the coming months, the projection is for the year to end with an inflation rate of 2.3%. This control over inflation is crucial for the national economy, as price stability is a fundamental factor in fostering investment and economic growth. However, the president of the BCR also warned that the struggle to control inflation in the past came at a significant cost to the population.

During his participation, Velarde reflected on the possibility of having reduced inflation to a lower level during the peak of 8.81% in June 2022. He assured that the BCR could have acted more aggressively, but that would have led to an economic recession that would have caused even greater suffering among citizens. His approach reveals the complexity of economic management, where decisions must balance inflation control and the well-being of the population.

Additionally, Velarde highlighted that the BCR faces the challenge of controlling internal factors that affect inflation, given that its only tool to combat this issue is the interest rate. This comment underscores the central bank's reliance on monetary tools, even though other economic factors also influence inflation.

A relevant topic addressed by Velarde was the structure of the tax system in Peru. He pointed out that the corporate income tax is higher than the average of OECD countries, while the collection of personal income tax is considerably low, which could indicate high tax evasion. This imbalance in the tax system can affect the state's ability to finance public policies and create a more stable economic environment.

The discussion intensified when the topic of interest rates was mentioned. Velarde disagreed with the statements of the Minister of Economy, José Arista, who had called for a reduction in interest rates. Velarde argued that a large part of the investment in Peru is made with credit in dollars, which means that interest rates in local currency are not the main factor affecting investment. This observation highlights the interconnectedness of the Peruvian economy with the international market.

The president of the BCR also emphasized the importance of avoiding decisions that could lead to hyperinflation. His comment on the prohibition of lending directly to the government underscores a prudent approach that seeks to maintain the independence of the central bank, which is fundamental for the economic stability of the country. Such measures are vital in a context where investor confidence is a pillar for long-term growth.

Regarding economic growth, Velarde expressed clear views on the country's potential, estimating it at 2.6%, a figure he deemed too low. He warned that simply reducing interest rates will not increase the potential Gross Domestic Product (GDP), indicating that broader strategies are needed, including simplifying procedures and improving regulations to foster a more attractive investment environment.

The outlook presented by Julio Velarde is one of caution and pragmatism. Despite positive projections regarding inflation, the BCR faces structural challenges that require attention. For Peru to achieve more robust growth, a combination of fiscal and monetary policies is needed that not only controls inflation but also promotes investment and business confidence.

In conclusion, Velarde's statements underscore the complexity of economic management in a context where decisions must be made with careful consideration of their short- and long-term impacts. The BCR's commitment to maintaining independence and its focus on controlling inflation are fundamental to Peru's economic stability, but it will be crucial to implement reforms that allow for sustained and equitable growth in the future.