LIMA, Peru – September 17, 2025 – The autonomy of central banks is crucial for long-term price stability, warned Julio Velarde, president of the Central Reserve Bank of Peru (BCRP). He emphasized that succumbing to short-term political pressures could jeopardize economic health.
A truly autonomous central bank is essential for guaranteeing price stability.
Velarde explained that governments often face incentives to stimulate demand within their political cycles. These policies, he noted, can have delayed consequences, with effects taking years to manifest. An independent central bank, with a longer time horizon than a political term, is better equipped to resist such pressures and maintain stability.
Did you know? – Central banks manage a nation’s money supply and interest rates. Their independence allows them to make decisions free from political influence, focusing on long-term economic health. This helps control inflation.
risks to Global Financial Stability
the importance of central bank independence is underscored even in developed economies. Velarde pointed to the United States Federal Reserve, where monetary autonomy, though established, is a relatively recent achievement.
He cautioned that any loss of autonomy at the Federal Reserve would have significant global repercussions. Such a scenario could lead to increased inflation expectations and higher interest rates not only in the U.S. but worldwide.
Pro tip: – Monitor central bank actions and statements. They signal economic trends.Understanding their independence and policy decisions helps gauge market stability and potential investment impacts.
Velarde’s remarks came during a ceremony where he was honored by the San Pablo Catholic University (UCSP) with the title of Doctor Honoris Causa. The event took place on the morning of September 17.
“I am deeply grateful for this distinction,” Velarde stated. “The function of the Central Reserve Bank is price stability. this is what my technical team and I have continuously strived for, building on yea
