Peru's Central Bank holds benchmark rate at 4.25% for 11th month

The Central Reserve Bank of Peru (BCRP) has kept its benchmark interest rate unchanged at 4.25% for the eleventh month in a row. The decision, made during the bank's monthly board meeting on Thursday, comes as the country recorded a monthly inflation rate of 0.29% in July, with inflation excluding food and energy at 0.28%.

According to the BCRP, the monthly inflation figures were primarily driven by increased prices for certain food items and national transportation fares. These rises were attributed to higher seasonal demand linked to Peru's independence celebrations on July 28 and 29. Year-on-year, total inflation rose from 4% in June to 4.1% in July, while core inflation (excluding food and energy) increased from 4.5% to 4.6%.

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This deviation from the target range is mainly due to the rise in fuel prices and their effects on transportation costs in March and April.

The bank noted that a deviation from the target range was mainly due to rising fuel costs and their impact on transportation expenses in March and April. However, excluding the transport sector, underlying inflation remained at 1.7% year-on-year, staying below 2% since April 2026. Twelve-month inflation expectations also rose to 3.0% in July, reaching the upper limit of the target range.

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There is a risk that a more intense impact from the El Niño climate phenomenon, as well as geopolitical tensions in the Middle East, will have more persistent effects on inflation.

The BCRP projects that both annual inflation and core inflation will return to the target range, settling around 2% as the effects of supply shocks diminish. However, the bank cautioned about potential risks, including a more intense impact from the El Niño climate phenomenon and geopolitical tensions in the Middle East, which could lead to more persistent inflationary effects.

Despite these risks, the BCRP indicated that global risks have recently moderated due to the normalization of hydrocarbon supplies. Nevertheless, uncertainty persists regarding the Middle East negotiations and other geopolitical and trade risks. The bank remains optimistic about favorable global economic growth prospects and continued favorable terms of trade for Peru. The board stated it is closely monitoring inflation data, economic activity, and supply shocks to make necessary adjustments to monetary policy.

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In this environment, the favorable prospects for global economic activity growth continue to be positive and the terms of trade remain favorable for the Peruvian economy.