Peru’s economy contracted in June, pushing the economy into a recession and bolstering expectations of an interest rate cut in the near future.
(Bloomberg) — Peru’s economy contracted in June, pushing the economy into a recession and bolstering expectations of an interest rate cut in the near future.
The economy shrank 0.56% compared to a year ago, national statistics agency INEI said on Tuesday. The median forecast of nine analysts surveyed by Bloomberg was for a drop of 0.7%.
Peru’s finance ministry had taken a more optimistic tone, forecasting that output would remain flat in June.
Peru’s economy has now contracted for two straight quarters, which economists define as a technical recession. All of Latin America’s major inflation-targeting economies are forecast to ease monetary policy as growth and inflation cool across the region.
Chile and Brazil have already started cutting rates, and Colombia is forecast to follow suit over the next months. Peru’s central bank is likely to ease policy at some time between September and December, said Felipe Hernandez, who covers Latin America for Bloomberg Economics.
Peru’s economy has been hit by political turmoil since 2016, and has faced additional pressure from the El Nino weather pattern this year.
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The economy was hit by a continued halt to its important fishmeal industry, which has been unable to operate due to warmer-than-usual waters in the Pacific Ocean.
Finance minister Alex Contreras has said the economic contractions is expected to speak later on Tuesday to address the slowdown.
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