Peru Holds Key Interest Rate at 4.25% Amid Political Uncertainty

Key facts

• Peru's central bank maintained its benchmark interest rate at 4.25%.
• This is the ninth consecutive month the rate has been held steady.
• Inflation in April stood at 4.01%, above the bank's target range.
• The bank anticipates inflation will decrease to approximately 2% by 2027.
• Global economic growth prospects are positive despite elevated risks.

Peru's central bank opted to keep its benchmark interest rate unchanged at 4.25% for the ninth consecutive month, a decision that aligned with the expectations of most analysts. This move comes as the country navigates a period of political uncertainty with a closely contested presidential runoff election underway.

While inflation has shown signs of easing, the annual rate in April remained at 4.01%, still above the central bank's target range of 1% to 3%. The bank's board indicated that much of the recent inflationary pressure stems from temporary supply-side factors and anticipates inflation will fall to around 2% by 2027 as these pressures dissipate.

The bank also noted that global risk remains elevated due to ongoing conflict in the Middle East, contributing to financial market volatility and high international oil prices. Despite these global challenges, the outlook for global economic growth this year is viewed positively, with terms of trade remaining favorable for Peru's economy.