The central bank of that country decided to validate a reduction in the reference interest rates and thus reach their lowest level in two years.
Peru lowered its benchmark interest rates to their lowest level in two years. The Andean country has managed to have the lowest inflation rate among the main economies in Latin America, but its level is also below that of the United States, the Eurozone and Japan.
The central bank cut its benchmark interest rate by a quarter of a percentage point to 5.25%. Policymakers were looking at core inflation – price increases excluding food and energy costs – which bottomed out at 3%.
However, last month, The underlying price indicator slowed to 2.78%, while headline inflation reached 2.03%.
In its official statement, the central bank stated that The rate cut does not necessarily imply that further reductions will be made in the future. Regarding general inflation, they raised: the goal is to keep it between 1% and 3%while underlying inflation is expected to continue to decline.
Peru vs other countries
Not only does Peru have the lowest inflation among the major economies in Latin America, the US, the Eurozone and Japan, but It also has the lowest borrowing costs among the major economies in the region.
Peru’s rate is now equal to the lower of the Federal Funds Rate, which is typically considered a floor for emerging market economies due to the potential for currency devaluation.
In this regard, Central bank president Julio Velarde said Peru could be as much as one percentage point below the Fed.
Peru suffered a recession in 2023, and although the recovery picked up, it was cut short in June.
Source: Ambito
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