Peru’s central bank keeps interest rate steady at 7.75% amid inflationary trends and external challenges

For the seventh consecutive month, Peru’s Central Bank has decided to maintain its benchmark interest rate at 7.75%.

The bank has indicated that new data regarding inflation and its drivers would influence any future adjustments to this rate.

Economic indicators from July display a mild rebound compared to the prior month, yet they still lean towards a pessimistic outlook.

External factors such as societal conflicts and the coastal El Niño phenomenon have more profoundly influenced economic activities and domestic demand than previously anticipated.

In July, the monthly inflation rate stood at 0.39%, while core inflation (excluding food and energy) was 0.29%.

The annual inflation rate declined from 6.46% in June to 5.88% in July. Meanwhile, the core annual inflation decreased from 4.35% in June to 3.89% in July.

Both these rates have significantly dropped for the second month in a row but remain above the upper limit of the inflation target range.

Predictions suggest a continued downward trend in year-on-year inflation in the upcoming months, aligning closely with the target range by year-end and squarely within it at the start of the next year.

These forecasts rely on the moderation of global food and energy prices, the reversal of supply shocks in the agricultural sector, and declining inflation expectations for the remainder of the year.

However, the bank expressed concerns over potential risks from climatic factors.

Inflation expectations for the next twelve months reduced from 3.83% in June to 3.57% in July, surpassing the target range’s upper boundary.

The bank’s board emphasized its commitment to actions ensuring the inflation’s return to the target range in the projected horizon.

The session concluded with the decision to hold the overnight deposit rate for operations in the national currency with the financial system at 5.25% annually.

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