Peru lifts key rate to 4.50% amid inflation rise

Modern central bank building in a financial district symbolizing Peru’s rate hike and changing inflation policy

Key Points

01Peru’s central bank raised its benchmark rate by 25 bps to 4.50%
02The hike ends a 14‑month pause at 4.25% and is the first rise in nearly four years
03Headline inflation climbed to 5.25% in October, above the 1%–3% target range
04The bank now forecasts 4.2% inflation for 2026, seeing a return to target in 2027

Peru ends 14‑month pause with rate hike to 4.50%

Peru’s central bank increased its benchmark interest rate by 25 basis points to 4.50% on November 12, 2026, in its first rate hike in nearly four years. The decision ends a 14‑month period during which the policy rate had been kept at 4.25%. The move was widely anticipated, with most surveyed analysts expecting an increase, while a minority had projected no change.

The rate increase is intended to contain a surge in consumer prices that has pushed inflation above the central bank’s tolerance band. Policymakers opted to tighten monetary conditions after a prolonged period of stability in borrowing costs in 2026, following several rate cuts carried out in 2025.

Inflation pressures from food and energy

Headline inflation in Peru has remained above the upper limit of the central bank’s 3% target for eight consecutive months and accelerated to 5.25% in October 2026, its highest level since 2023.

In year‑on‑year terms, inflation rose from 4.5% in September to 5.25% in October, reflecting the intensification of these price pressures.

Policy framework and updated inflation outlook

Peru’s central bank operates with an inflation target range of 1% to 3%, with a midpoint of 2%. In response to recent developments, bank president Julio Velarde raised the inflation forecast for 2026 to 4.2%, up from a projection of 3.8% made in September. He expects inflation to return to the target range in 2027 as temporary pressures fade.

Even after the latest hike, Peru continues to register some of the lowest inflation and borrowing costs among the main economies in Latin America. The current tightening follows three 25‑basis‑point cuts to the reference rate in January, May and September 2025. In 2026, the central bank had not adjusted its key rate until the November decision to lift it to 4.50%.

Key Takeaways

01Peru’s first rate hike in nearly four years marks a clear shift from a prolonged steady‑rate stance to a more active fight against above‑target inflation.
02Inflation pressures are concentrated in food and energy, while core inflation remains anchored at the middle of the target band, shaping a calibrated policy response.
03The updated 2026 inflation forecast and guidance for a return to target in 2027 suggest a medium‑term framework in which further moves will depend on how temporary price shocks evolve.

References