early info shows protests affecting growth, inflation By Reuters

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© Reuters. FILE PHOTO: A demonstrator waves Awyayala’s flag during a protest demanding for an indefinite nationwide strike during a march against the government of Peru’s President Dina Boluarte, in Lima, Peru, February 9, 2023. REUTERS/Alessandro Cinque

By Isabel Woodford and Marion Giraldo

(Reuters) – Peru’s economy and inflation have likely been hit by the ongoing social upheaval that has rocked the Andean nation since December, early indications suggest, the head of the central bank’s economic studies unit Adrian Armas said on Friday .

Protests over the removal and arrest of former President Pedro Castillo in December have snarled the Andean nation, with clashes between demonstrators and security forces leaving dozens dead. It is the worst violence in Peru in two decades, and threatens to destabilize one of region’s most reliable economies.

Armas’ comments come a day after the central bank maintained its benchmark interest rate at 7.75%, as monetary policymakers in the copper-producing Andean nation battle the highest inflation in a quarter of a century.

It was the first time since the second half of 2021 that the bank did not hike its rate as it combats inflation that has surged well ahead of the bank’s target range to 8.66% in January, near the quarter-century high it reached last year.

A presentation accompanying the press conference by Armas underscored that Thursday’s decision to keep rates on hold “does not necessarily imply the end of the cycle of interest rate increases.”

Future adjustments in the key rate will depend on new inflation, including the macroeconomic effects of the social unrest, said the presentation.

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