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UPDATE 1-Peru keeps benchmark rate at 4.25 pct for 24th month
May 9, 2013 / 11:31 PM / 4 years ago

UPDATE 1-Peru keeps benchmark rate at 4.25 pct for 24th month

LIMA, May 9 (Reuters) - Peru’s central bank held its benchmark interest rate steady at 4.25 percent for the 24th straight month on Thursday, as inflation runs within the target range and the economy expands near its potential.

All 11 economists surveyed by Reuters had predicted the monetary authority would again keep the rate unchanged.

The decision to hold came as inflation in April slowed to 0.25 percent after spiking 0.91 percent in March - the highest monthly rate for March in years.

Inflation for the 12 months through April was 2.31 percent, within the central bank’s target range of 1 to 3 percent.

“Inflation is expected to converge to the center of the target range over coming months due to the improvement in food supply conditions, a rate of productive activity close to its potential, and inflation expectations anchored within the target range,” 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 economy expanded 4.9 percent in February compared with the same month a year ago, and 6.3 percent in all of 2012 - one of the fastest paces in Latin America.

A similar expansion is expected this year, although the global economy is showing signs of weakness. The central bank has cut its forecast for the 2013 trade surplus by more than half.

Mineral exports have traditionally powered Peru’s economy, but growth in Peru in the past few years has been led by strong domestic demand and loans for everything from cars to new houses.

The central bank has described its current monetary stance as slightly tighter than neutral. It has repeatedly raised reserve requirements for banks to discourage speculative capital inflows as its currency trades around historic highs.

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