Peru Central Bank Holds Interest Rate at 4.25%

The Central Reserve Bank of Peru unexpectedly maintained its benchmark interest rate at 4.25% on Wednesday, marking the 13th consecutive month that borrowing costs have remained unchanged. The decision defied expectations from a majority of economists surveyed by Bloomberg, who had anticipated a quarter-point increase.

Policymakers characterized the recent acceleration in inflation, which reached 4.55% in September, as a temporary result of rising food costs and supply shocks. Governor Julio Velarde Flores expects inflation to end the year at 4.2% and return to the bank's target range of 1% to 3% by 2027.

Future rate adjustments depend on new inflation data and the impact of El Niño weather patterns. These patterns are currently affecting infrastructure, fishing, and crop yields through flooding and unusual heat.