December 6, 2012 / 11:56 PM / 5 years ago

UPDATE 1-Peru keeps benchmark rate at 4.25 pct for 19th month

LIMA, Dec 6 (Reuters) - Peru’s central bank on Thursday held its benchmark interest rate steady at 4.25 percent for the 19th straight month, as inflation has cooled to within its target range even as the economy hurtles along at 6 percent rate of growth.

All 14 economists surveyed by Reuters had predicted the monetary authority would once again keep the rate unchanged.

Annual inflation in November slowed to 2.66 percent, within the central bank’s 1 percent to 3 percent target range.

The central bank now seems more worried about the effect of the wobbly global economy on Peru’s swift expansion than about inflation getting out of hand.

“This decision reflects the fact that inflation continues to decline, having returned to the target range as supply shocks partially reversed, in a context of domestic economic growth that is close to its potential and an external environment that is still highly uncertain,” the central bank said.

Seasonal price spikes for locally grown foods and external shocks had pushed inflation up to 3.74 percent in the 12 months through September, but consumer prices dropped in both November and October.

The economy expanded 6.3 percent in the first three quarters of 2012. 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 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 domestic lending, consumption and construction are now fueling expansion.

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