Peru’s Central Bank Lowers Interest Rate to 5.25%, Marking the Second Consecutive Monthly Cut

The Central Bank of Peru lowered its benchmark interest rate by 25 basis points to 5.25% on Thursday, marking the second consecutive monthly cut.

This decision comes as the bank anticipates that annual inflation will remain within its target range, and core inflation, excluding food and energy, will continue its downward trend.

Peru’s annual inflation rate stood at 2.03% in August, down from 2.13% in July. This level has remained within the central bank’s target range of 1% to 3% for several months. Excluding food and energy, prices decreased to 2.8% year-over-year in August from 3.0% in the previous month, according to the bank.

“The projection is for annual inflation to stay within the target range over the forecast horizon, with core inflation following a downward trajectory,” the monetary authority stated in a press release.

The central bank’s benchmark interest rate is now at its lowest in more than two years, during a period when the country’s mining-dependent economy shows signs of recovery after falling into recession in 2023.

“In August, most current conditions and expectations indicators remained in the optimistic range for the fourth consecutive month. Both sets of indicators showed improvement,” the bank emphasized.

The decision to cut rates “does not necessarily imply further successive reductions. Future adjustments will depend on new information regarding inflation and its determinants,” the bank added.

Peru, the world’s third-largest copper producer, is projected to see 3.2% economic growth in 2024.