Peru’s Monetary Policy Committee announced on November 13, 2025, that the benchmark interest rate remains at 4.25%, unchanged from the previous two months and well below the 4.75% peak seen earlier this year. This decision reflects a cautious approach amid easing inflation and persistent external uncertainties. The rate has been stable since September, following a series of cuts from May through August that lowered borrowing costs by 0.50 percentage points from 4.75% to 4.25%.

Drivers this month

• Inflation moderated to 3.80% YoY in October, down from 4.20% in August.
• Core inflation components, including food and energy, showed slower growth.
• Global commodity prices remain volatile, especially copper and oil.
• Geopolitical tensions in Latin America and Asia weigh on export demand.

Policy pulse

The 4.25% rate sits just above the estimated neutral rate for Peru, balancing inflation containment with growth support. The central bank’s inflation target remains 2.00% ±1.00%, and current inflation is trending toward the upper bound but showing signs of stabilization.

Market lens

Immediate reaction: The Peruvian sol (PEN) appreciated 0.15% against the USD within the first hour post-announcement, while 2-year local government bond yields held steady near 5.10%. Breakeven inflation swaps for the next 12 months edged down by 5 basis points, signaling market confidence in inflation control.

Core macroeconomic indicators underpin the central bank’s decision. Peru’s GDP growth slowed slightly to 2.70% YoY in Q3 2025, down from 3.10% in Q2, reflecting weaker external demand and cautious domestic consumption. Unemployment remains low at 5.40%, supporting steady wage growth. Inflation, the primary policy focus, has declined from a peak of 5.10% YoY in March 2025 to 3.80% in October.

Monetary policy & financial conditions

Monetary conditions have eased since mid-2025, with the policy rate cut by 50 basis points from May to September. Credit growth accelerated modestly to 6.20% YoY, driven by consumer loans and mortgage demand. The banking sector remains well-capitalized, and liquidity conditions are ample.

Fiscal policy & government budget

Fiscal policy remains constrained by a government deficit of 3.50% of GDP projected for 2025, slightly above the 3.00% target. Public investment has slowed, limiting stimulus potential. Debt-to-GDP stands at 32%, manageable but with limited fiscal space amid global uncertainty.

External shocks & geopolitical risks

Peru faces risks from fluctuating commodity prices, especially copper, which accounts for over 50% of exports. Recent geopolitical tensions in Latin America and trade disruptions in Asia pose downside risks to export growth and capital inflows.

Market lens

Immediate reaction: The Peruvian sol strengthened modestly post-decision, reflecting market approval of the steady policy. Local bond yields remained stable, indicating confidence in inflation outlook and fiscal discipline.

Looking ahead, Peru’s monetary policy faces a delicate balancing act. Inflation is expected to continue easing toward the 2.00% target by mid-2026, but risks remain from commodity price swings and geopolitical tensions. The central bank’s forward guidance suggests a data-dependent approach, with potential rate hikes if inflation surprises on the upside or cuts if growth falters.

Bullish scenario (30% probability)

• Global commodity prices stabilize or rise moderately, boosting exports.
• Inflation continues to decline steadily, allowing gradual rate cuts by Q3 2026.
• Fiscal consolidation improves, supporting investor confidence.

Base scenario (50% probability)

• Inflation stabilizes near 3.00% through early 2026, prompting a hold on rates.
• Growth remains moderate at 2.50–3.00% YoY.
• External risks persist but do not escalate materially.

Bearish scenario (20% probability)

• Commodity prices fall sharply, hurting export revenues.
• Inflationary pressures resurge due to supply shocks.
• Geopolitical tensions worsen, leading to capital outflows and currency depreciation.

Peru’s interest rate decision to maintain the benchmark at 4.25% reflects a cautious but balanced approach amid easing inflation and persistent external risks. The central bank’s steady hand aims to support growth without reigniting inflation pressures. Fiscal discipline and geopolitical developments will be critical to watch as they shape the macroeconomic landscape in 2026.

Investors and policymakers should monitor inflation trends, commodity markets, and fiscal policy adjustments closely. The current environment favors a wait-and-see stance, with flexibility to adjust policy as new data emerges.

Key Markets Likely to React to Interest Rate Decision

The interest rate decision in Peru typically influences local currency strength, bond yields, and equity market sentiment. Key tradable symbols that historically track these dynamics include the Peruvian sol currency pair, local government bonds, and commodity-linked equities. These instruments provide insight into market expectations and risk appetite following monetary policy announcements.

• PENUSD – The Peruvian sol’s exchange rate versus the US dollar is sensitive to interest rate changes and inflation outlook.
• BAP – Banco de Crédito del Perú, a major bank, reflects credit conditions and monetary policy impact.
• SAM – Sociedad Minera Cerro Verde, a copper mining company, correlates with commodity price shifts affecting Peru’s economy.
• BTCUSD – Bitcoin’s price often reacts to global risk sentiment influenced by monetary policy shifts.
• USDPEN – The inverse of PENUSD, useful for tracking currency strength from a USD perspective.

Insight: Interest Rate vs. PENUSD Exchange Rate Since 2020

Since 2020, Peru’s benchmark interest rate and the PENUSD exchange rate have shown a strong inverse correlation. Periods of rate hikes, such as in early 2025, coincided with PEN appreciation, while rate cuts aligned with depreciation phases. This relationship underscores the central bank’s influence on currency valuation and capital flows. The chart below illustrates this dynamic, highlighting the recent stabilization of rates and the modest strengthening of the sol.

FAQs

What was the latest interest rate decision for Peru?

The central bank held the benchmark interest rate steady at 4.25% in November 2025, unchanged from the previous two months.

How does the interest rate decision impact inflation in Peru?

The decision aims to balance inflation control with growth support, as inflation has moderated to 3.80% YoY but remains above the 2.00% target midpoint.

What are the main risks facing Peru’s monetary policy outlook?

Key risks include commodity price volatility, geopolitical tensions, and fiscal constraints that could pressure inflation or growth.

Final takeaway: Peru’s steady interest rate at 4.25% signals a cautious pause amid easing inflation and external uncertainties, with a flexible policy stance poised to respond to evolving economic conditions.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.