Peru’s Central Bank Lowers Benchmark Interest Rate to 4.75%

The Central Reserve Bank of Peru (BCRP) cut its benchmark interest rate by 25 basis points to 4.75%. This decision brings the rate closer to what the bank considers a neutral level. The BCRP announced this move in its January 2025 monetary program report.

The bank stated that future rate adjustments would depend on new inflation data and its determinants. Several factors influenced this rate reduction. In December, the monthly inflation rate grew by only 0.11%. Core inflation, which excludes food and energy prices, increased by a mere 0.40%.

The 12-month inflation rate fell from 2.3% to 2% in December. Inflation expectations for the next 12 months remained slightly below 2.50%, within the target range. The BCRP projects that the annual core inflation will also stay within its target.

Peru’s Central Bank Lowers Benchmark Interest Rate to 4.75%. (Photo Internet reproduction)

Most economic activity indicators worsened last month. However, they remained optimistic, as seen in recent months. This suggests that economic activity continues to grow around its potential rate. The bank’s board remains vigilant about new inflation data and its determinants.

These factors include the evolution of the core index, inflation expectations, and economic activity. The BCRP will consider this information for potential monetary policy adjustments. This rate cut aims to support economic growth while maintaining price stability.

Peru’s Central Bank Lowers Benchmark Interest Rate to 4.75%

The decision reflects the bank’s balanced approach to monetary policy. It seeks to stimulate the economy without compromising inflation targets. This move may encourage borrowing and investment, potentially boosting economic activity in Peru.

However, the effectiveness of this rate cut depends on various external factors. These include global economic conditions, commodity prices, and domestic political stability. The BCRP’s decision demonstrates its commitment to maintaining economic stability in Peru.

As the situation evolves, the bank will likely continue to monitor economic indicators closely. It will adjust its policies as needed to support Peru’s economic growth and price stability. This proactive approach aims to navigate the challenges of the current economic landscape.