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UPDATE 1-Peru keeps benchmark rate at 4.25 pct for 22nd month
March 7, 2013 / 11:21 PM / in 5 years

UPDATE 1-Peru keeps benchmark rate at 4.25 pct for 22nd month

LIMA, March 7 (Reuters) - Peru’s central bank held its benchmark interest rate steady on Thursday at 4.25 percent for the 22nd straight month as inflation runs within its target range even as the economy hurtles along at a 6 percent clip.

All 10 economists surveyed by Reuters had predicted the monetary authority would once again keep the rate unchanged.

Consumer prices in February fell 0.09 percent - putting annual inflation at 2.45 percent, within the central bank’s target range of 1 percent to 3 percent.

“It is projected that inflation will converge to 2 percent in coming months, thanks to better supply conditions for food and productive activity close to its potential, against a backdrop of ongoing weak global production indicators,” the central bank said in a statement.

The economy grew 6.3 percent in all of 2012 - one of the fastest paces in the region - as strong domestic demand and construction activity offset weaker exports.

A similar pace is expected this year.

Peru’s potential growth rate, the maximum rate that the economy can expand without provoking excessive inflation, is normally seen around 6 percent or 6.5 percent.

“Some current and preliminary indicators show growth in Peru’s economy has stabilized near its sustainable long-term rate, though indicators linked to external markets are still weak,” the statement said.

The central bank has described its current monetary stance as slightly tighter than neutral. It has raised bank reserve requirements several times to discourage speculative capital inflows as its currency trades around historic highs and to slow a rapid credit expansion.

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