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IDEA colloquium: the Peruvian formula to end inflation that caused applause among businessmen


Julio Velarde Flores was interviewed by Fabián Kon, from Banco Galicia (Christian Heit)
Julio Velarde Flores was interviewed by Fabián Kon, from Banco Galicia (Christian Heit)

Julio Velarde Flores became president of Peruvian Central Bank in 2006 and he has remained in office since then, immune to seven changes in the leadership of the Executive Branch of that country. In the last 17 years Peru went through a process by which it converted sun in one of the most stable coins of the region, with a central entity with abundant levels of reserves and with low inflation. And this Wednesday he presented before the 59th IDEA Colloquium the Peruvian “formula” to stabilize prices even having had hyperinflation at the end of the 80s, just as happened to Argentina.

In a panel that was moderated by the general manager of Banco Galicia Fabian Kon, the Peruvian official commented on how that country went through the process to achieve credible and persistent independence of the central bank. A key word that detailed: “restrictions”.

“I can be removed if I lend money to the government or buy bonds. I also cannot establish differential exchange rates. I can be removed for being a serious offense. I can not put coefficients for banks to lend to a particular sector, nor to force banks to lend buy treasury bonds“, was his first intervention, which was accompanied by applause by the executive audience that attended the IDEA event this Wednesday in Mar del Plata.

In this sense, consulted by Kon, Velarde assured that another of the keys to making monetary policy powerful is in the “ambition” of inflation targets. “Part (of the explanation) is that we have been a very dollarized country, the inflation goal is 2% plus minus 1, because we competed with the dollar“said Velarte, and assured that “with our own currency (we have) inflation lower even than Ecuador”, a country that currently has the dollar as legal tender, and which is one of the countries in which Javier Milei seeks to reflect itself to advance dollarization.

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