Peru central bank cuts benchmark interest rate to 4.75%

LIMA (Reuters) – Peru’s central bank trimmed its benchmark interest rate by 25 basis points to settle at 4.75% on Thursday, surprising analysts who expected the country’s monetary authority to hold the rate steady at 5%.

Peru has since September 2023 gradually eased the key lending rate from a high of 7.75% it held through the first part of that year.

In a statement, the central bank said the cut moves the rate to a level it estimates to be “neutral” while adding future rate adjustments will track new data on inflation and its derivatives.

The bank’s decision to lower borrowing costs came after December’s inflation rate inched up by 0.11% month-on-month, bringing price increases to 1.97% last year – within the bank’s target range of 2% plus or minus once percentage point.

Prices were down from the 3.24% annual inflation rate recorded in 2023 and far below the 8.46% in 2022. December’s annualized rate was also down from 2.27% the previous month.

Peru boasts one of Latin America’s lowest benchmark interest rates.