Peru’s central bank is expected to lift interest rates Wednesday for the first time in more than three years as inflation remains above target and heavy rains may hit food prices.
Nine of 13 analysts surveyed by Bloomberg expect the board, led by veteran Governor Julio Velarde, to raise borrowing costs by a quarter-point to 4.5%. The other four forecast no change.
A hike would be the first since January 2023 and would interrupt a two-year easing cycle that has trimmed the key rate by 3.5 percentage points. The decision is scheduled for 6 p.m. local time.
Peru is one of Latin America’s top performing economies, with a stable currency and one of the lowest borrowing costs and inflation rates among its largest regional peers. But inflation has been above the 3% ceiling of the central bank’s target range for seven straight months. In September, consumer prices rose 4.55%, their fastest pace since 2023, as rising food costs add to the global energy shock.
Read More: Peru’s Inflation Accelerates to Fastest Pace in Three Years
What Bloomberg Economics Say
“Higher inflation, stronger demand and currency depreciation warrant less monetary accommodation. Policymakers will likely emphasize it’s not the start of a tightening cycle, though keep the door open to further hikes if inflationary pressures persist.”
— Felipe Hernandez (Economist), Adriana Dupita (Economist) and Jimena Zuniga (Analyst)
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Velarde said last month that a rate hike was on the table, with any move largely depending on the impact of a stronger El Niño weather phenomenon, which is expected to bring heavy rains and floods in the coming months. He also raised his 2026 inflation forecast to 4.2% from 3.8%.
The move would come just after the Federal Reserve raised rates earlier in the month., normally seen as a floor for emerging market economies due to the potential for devaluation of their currency.
The Peruvian sol has weakened 1.8% since the central bank’s last meeting, hitting its lowest level since June as the US dollar strengthened. Still, it has performed better than most regional currencies.
While Peru’s central bank targets annual inflation of 1% to 3%, it prefers to be as close to the mid-point of the range as possible. Policymakers expect it to return to the target band in 2027 as temporary pressures fade.