(Adds quote from central bank, context)
LIMA, Oct 12 (Reuters) - Peru’s central bank left the benchmark interest rate unchanged at 3.5 percent on Thursday, citing expectations that the economy will recover from a slowdown as public and private investments increase.
Thirteen out of 14 analysts polled by Reuters had forecast the hold, while one expected a cut for a second month in a row.
The central bank had lowered the interest rate by 25 basis points in May, July and September as economic growth faltered amid severe flooding and a graft scandal that stalled public work projects.
“Growth of economic activity remains under its potential, although it’s expected to achieve greater dynamism through an increase in public and private spending,” the bank’s board said in a statement.
The central bank now expects the economy to grow by 2.8 percent this year, down from last year’s 3.9 percent expansion.
The annual inflation rate eased to 2.94 percent in September, within the central bank’s 1 to 3 percent target range.
Reporting by Lima Newsroom; Editing by Diane Craft and Leslie Adler