LIMA Nov 8 Peru's central bank held its
benchmark interest rate steady at 4.25 percent for
the 18th month in a row on Thursday, as inflation has retreated
and the economy grows near its potential.
All 16 economists surveyed by Reuters had predicted the rate
would once again be left unchanged in South America's
Consumer prices fell in October, easing inflation after
several months of sharper-than-expected price increases.
Interannual inflation in October was 3.25 percent, even as the
economy continues on track to expand 6 percent this year.
"This decision recognizes the divergence of inflation due to
temporary supply factors, domestic growth near its potential,
and ongoing uncertainty in external markets," the central bank
said in a statement.
Peru's potential growth rate, the maximum rate the economy
can expand without provoking excessive inflation, is normally
seen around 6 percent or 6.5 percent.
The central bank avoided specifying a timeline for when
inflation might reach target. Central Bank President Julio
Velarde said on previous occasions that it would slow to just
under 3 percent by the end of the year.
Seasonal price spikes for locally grown foods and external
shocks earlier this year pushed inflation up to 3.74 percent in
the 12 months through September.
"In October, better supply conditions for perishable goods
contributed to a reversal of supply shocks that were temporarily
affecting inflation," the central bank said. "Inflation will
come back into the target range, gradually easing toward 2
The central bank has described its current monetary stance
as slightly tighter than neutral. It has raised bank reserve
requirements four times this year to discourage speculative
capital inflows and to slow a rapid credit expansion.
The country is a top exporter of minerals, which drive 60
percent of its international shipments. But exports have slumped
in recent months, and a domestic construction and consumption
boom is now leading expansion.