UPDATE 1-Peru's central bank keeps base rate steady for 28th month

Thu Sep 12, 2013 8:11pm EDT

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LIMA, Sept 12 (Reuters) - Peru's central bank kept its benchmark interest rate steady at 4.25 percent for the 28th straight month on Thursday, as the economy expands near its potential and inflation is expected to cool in coming months.

All 14 economists surveyed by Reuters had predicted the central bank would keep the rate steady.

The decision to hold came as the economy this year has expanded more slowly than expected, and annual inflation runs at a slightly higher than targeted 3.28 percent.

The central bank said it expected inflation to slow to within its 1 to 3 percent target range in the third quarter.

Peru has enjoyed a mining-fueled economic boom over the past decade, but weak demand from buyers like China and lower mineral prices have slowed growth this year. The government and central bank now expect a 2013 trade deficit, instead of a surplus - the first gap since 2001.

The central bank appeared slightly more optimistic about global economic growth on Thursday than in previous months.

"Current and preliminary indicators of productive activity show Peruvian economic growth close to its long-term sustainable level, while indicators linked to the external market showed a slight recovery, which has favorably affected the prices of export products," the central bank said in its statement.

The economy expanded 4.4 percent in June, compared with the same month in 2012. Data for July will be released on Monday.

The central bank said that if needed, it would further loosen reserve requirements on banks as it has in recent months to encourage lending.

Last year, the economy grew at a 6.3 percent clip - one of the fastest rates in the region.

The central bank has trimmed its forecast for 2013 economic growth to between 5.5 and 6 percent from its previous estimate of 6.1 percent.

Peru's potential growth rate, the maximum rate the economy can expand without provoking excessive inflation, is normally seen at around 6 percent or 6.5 percent.

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