Peru central bank holds benchmark interest rate at 5.25% in surprise move

By Aida Pelaez-Fernandez and Marco Aquino

LIMA, Oct 10 (Reuters) - Peru's central bank unexpectedly held the benchmark interest rate at 5.25% on Thursday, after two consecutive cuts, cautioning over transitory inflation effects in the final months of the year.

The central bank expects a slight increase in year-on-year inflation in the fourth quarter due to a low comparative base in the same period of 2023, it said in a statement.

However, "annual inflation and core inflation are expected to stay within target range on the projected horizon," the monetary authority said.

The hold, which defied analysts' expectations of a 25 basis point cut, follows data showing annual inflation at 1.78% last month, the lowest since 2020, and consumer prices falling 0.24% from August to September.

The institution stressed that future rate decisions will depend on inflation data and its determinants.

Peru has one of Latin America's lowest benchmark interest rates. (Reporting by Aida Pelaez-Fernandez and Marco Aquino; Editing by Kylie Madry and Chris Reese)