Inflation targeting in Peru: The reasons for the success

The Peruvian central bank took two major decisions in the early 2000s: implementing an inflation target system and accumulating sufficient foreign-exchange reserves. These two decisions have allowed the central bank to preserve macroeconomic stability in favorable or unfavorable international environments. The use and impact of the main monetary policy instruments over the period 2002-2013 is discussed, namely, the short-term interest rate set by the central bank or reference interest rate, the reserve requirement ratio in local and foreign currencies, and, finally, sterilized intervention in the foreign exchange market. The process of bank credit (de)dollarization is also reviewed.