UPDATE 1-Peru's central bank keeps key interest rate at 4 pct

Thu Jun 12, 2014 7:58pm EDT

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LIMA, June 12 (Reuters) - Peru's central bank kept its benchmark interest rate unchanged at 4 percent for the seventh month in a row on Thursday, describing slowing economic growth as "temporary."

All 14 foreign and local economists polled by Reuters this week said the bank would again hold the rate steady.

While weaker mineral exports have dragged down Peru's economic growth from rates topping 6 percent, the central bank said it did not foresee a prolonged slowdown.

"Current and preliminary indicators show a temporary weakening of economic activity, with gross domestic product growth rates under their potential, mainly due to slower growth in investment and exports," the bank said in a statement.

The bank views Peru's potential growth rate, the pace at which the economy can grow without stoking inflation too much, at 6 percent.

The economy expanded 4.8 percent in the first quarter from the same period a year before, and the central bank and government have warned that growth in April was likely weak.

The result for April will be released on Monday.

The central bank has attributed slightly high inflation to supply factors and expects inflation to cool later this year, eventually reaching its goal of 2 percent in 2015.

The annual inflation rate rose to 3.56 percent in May, above the upper limit of the central bank's 1 to 3 percent target range for the fifth month in a row.

In November, the central bank surprised the market by lowering the key interest rate by 0.25 percent to encourage economic growth.

The central bank has said it expects a 5.5 percent expansion this year.

In early May, Central Bank President Julio Velarde told Reuters he would likely leave the base rate without changes in the near future unless the bank's growth or inflation expectations changed suddenly.

(Reporting by Lima Newsroom; Editing by Eric Walsh, Bernard Orr)

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