Peru | Inflation approaches the lower limit of the target range

Summary

The Lima Consumer Price Index (CPI) contracted 0.29% in August 2025, surprising the consensus of analysts. Year-on-year inflation fell to 1.1%, close to the lower limit of the Central Bank's target range. Inflation excluding food and energy rose slightly to 1.8%.

Key points

• Key points:
• In August, food prices fell sharply, particularly in the fish and seafood segment, following a moderation in disruptions to the fishing cycle. A similar trend occurred with transportation, where prices dropped following the July holidays. The readjustment of electricity and natural gas rates for residential use also contributed to the decline.
• For the last quarter of 2025, we forecast an increase in inflation, ending the year at around 2.2% due to a low year-on-year comparison base, with a downward bias.
• We believe the Central Bank will maintain its benchmark interest rate in the short term, currently at 4.50%, a level we estimate to be neutral.
• We cannot rule out a further cut in the policy rate, and we assign a slightly higher probability to this scenario given that the August inflation print could lead to lower inflation expectations and therefore a higher real interest rate.

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