Peru Bill to Boost Central Bank Independence Passes Hurdle

A Peruvian congressional committee approved a bill that seeks to increase central bank independence by preventing the election of its members from coinciding with presidential elections.

The bill extends the terms of board members to seven years from the current five, Luis Galarreta, who chairs the economy, banking and finance committee, said in an e-mailed statement. One member of the seven-member board would be replaced each year over a period of seven years, beginning in 2017, he said.

Under the current system the central bank’s six directors and president are appointed every five years, following the country’s congressional and presidential elections, which makes the process vulnerable to political influence, Galarreta said. The bill will now go to a vote on the floor of the Congress.

“A central bank with sufficient autonomy, independence and responsibility guarantees the necessary flexibility in monetary policy to ensure lower inflation,” and “win greater credibility among economic agents,” Galarreta said today.

President Ollanta Humala, who took office last July, appointed three directors to the board on Oct. 3 and ratified Julio Velarde as bank president to serve a second term. Congress has yet to name the remaining three directors.

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