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Peru Unexpectedly Cuts Interest Rate as Inflation Nears Target Band


(Bloomberg) — Peru surprised economists by cutting interest rates to a 20-month low as inflation slows to near the top of its target band.

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The central bank lowered its key rate to 6% on Thursday, as forecast by just one of 13 analysts in a Bloomberg survey. The remaining 12 expected rates to be held at 6.25%.

The bank downplayed concerns about persistent price pressures, saying that faster-than-expected March inflation had been “transitory.”

“We project that annual inflation will continue it downward trend and converge gradually to the center of the target range in coming months,” the bank said in its statement.

Peru’s economy is only gradually recovering from a recession, and investors are worried about a recent flare-up in political tensions. President Dina Boluarte is facing a probe into illegal enrichment following her use of several Rolex watches and other jewelry.

Boluarte survived two impeachment attempts this month over the scandal, and said in an address to the nation that the watches were a loan from an ally.

Read more: A $15,000 Rolex Threatens to Worsen Peru Leader’s Job Rating

Annual inflation has slowed significantly from a high of almost 9% in mid-2022 to 3.05% last month. Peru targets inflation of 2%, plus or minus one percentage point.

–With assistance from Rafael Gayol and Giovanna Serafim.

(Updates with comments from central bank statement from third paragraph)

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