(Bloomberg) — Peru unexpectedly left borrowing costs unchanged for a 13th straight month as policymakers expect a recent acceleration in inflation to prove temporary.
The central bank, led by veteran Governor Julio Velarde, held its key rate at 4.25% on Wednesday. The decision surprised nine of the 13 economists surveyed by Bloomberg who had expected a quarter-point hike, while only four forecast no change.
“The Board remains particularly attentive to new information on inflation and its determinants, including developments in core inflation, inflation expectations, economic activity and the duration of supply shocks, in order to make adjustments to the monetary policy stance in the short term,” the bank said in a statement. It also emphasized its commitment take “necessary actions” to bring inflation to target.
Peru is one of Latin America’s top performing economies, but inflation has remained above the 3% top of the central bank’s target range for seven straight months. In September, consumer prices rose 4.55%, their fastest pace since 2023, with rising food costs adding to the global energy shock.
Velarde said last month that policymakers couldn’t rule out raising the benchmark interest rate in the coming months, with any move largely depending on how El Niño weather develops.
Unusual heat and warmer sea temperatures are already hurting fishing and crop yields, while heavy rains and flooding threaten to damage infrastructure and disrupt transportation.
The central bank targets annual inflation of 1% to 3%, though policymakers prefer it to remain near the midpoint of that range. Velarde expects inflation to end the year at 4.2% before returning to target in 2027 as temporary pressures dissipate.
–With assistance from Rafael Gayol.
(Updates with central bank statement in the third paragraph.)
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