April 12, 2012 / 11:46 PM / 8 years ago

UPDATE 1-Peru central bank keeps benchmark rate at 4.25 pct

* March consumer prices rise at fastest pace in eight months

* Central bank expects inflation to fall back into target range

LIMA, April 12 (Reuters) - Peru’s central bank held its benchmark interest rate steady at 4.25 percent for the 11th straight month on Thursday as growth slows slightly and it bets that inflation will moderate.

All 13 economists surveyed by Reuters had predicted the decision even though consumer prices rose 0.77 percent in March, the fastest in eight months.

“This decision is due on the one hand to the deviation of inflation mainly reflecting temporary factors of supply and, secondly, that economic growth is close to its potential,” the central bank said in a statement.

Twelve-month inflation rose to 4.23 percent in March, outside the central bank’s 1 to 3 percent annual target range.

But the central bank said it expects inflation to fall back into its target range even though internal price shocks from floods that knocked out crops and high international fuel costs could pressure prices in the near term.

“It is expected that inflation reverses in the middle of the year, and with that the annual inflation rate should fall back into the target range,” the bank’s statement said.

Analysts also said there were no signs of demand pressures on consumer prices.

“The fact that inflation is being affected by supply factors does not merit a monetary policy response,” said Juan Carlos Odar of Lima’s Banco de Credito.

Peru’s government expects the country’s economy to grow up to 6 percent this year, confident Peru can weather the debt crisis in Europe.

Peru’s sol currency closed at its strongest level in some 15 years on Thursday, bidding 2.658 to the dollar with traders citing the country’s strong economic growth potential.

Neighboring Chile is also expected to hold its key rate steady at 5 percent on April 17.

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