BCRP holds key rate at 4.25%

The Central Reserve Bank of Peru decided to keep its benchmark interest rate at 4.25% in August. The monetary authority noted that monthly inflation was 0.07% in August, while monthly inflation excluding food and energy stood at 0.02%. On an annual basis, inflation increased from 4.1% in July to 4.4% in August, driven mainly by a base effect linked to negative monthly inflation recorded in August of the previous year. Core inflation excluding food and energy decreased from 4.6% to 4.5% over the same period.

According to the central bank, inflation's deviation from the target range was primarily caused by higher fuel prices and their impact on transport costs in March and April. Excluding transport, annual core inflation stood at 1.8%, remaining below 2% since April of the prior year. During 2025, the central bank cut the key rate three times, in January, May, and September, by 25 basis points each time. It has made no rate adjustments so far this year.

Twelve-month inflation expectations rose from 3% in July to 3.1% in August, moving slightly above the upper ceiling of the target range. The monetary authority projects that both headline inflation and inflation excluding food and energy will return to the target range and sit near 2% over the projection horizon. However, risks remain that the El Niño weather pattern and geopolitical tensions in the Middle East could have more persistent effects on consumer prices.

Leading indicators of economic activity through August continued to show positive performance, with all current situation metrics in the central bank survey improving from the prior month. Global risks remain elevated amid financial market volatility and swings in international oil prices. The board reaffirmed its commitment to taking necessary measures to ensure inflation returns to its target range.