Peru central bank holds benchmark rate steady at 4 pct

Reuters

LIMA, Jan 9 (Reuters) - Peru's central bank held its benchmark interest rate unchanged at 4 percent for the second month in a row on Thursday, while acknowledging again that the economy is growing at a rate below its potential.

All 10 foreign and local economists polled by Reuters earlier this week forecast the bank would hold the rate steady.

In November the central bank surprised the market by lowering the interest rate for the first time in more than four years to counter an economic slowdown.

The central bank reiterated on Thursday, as it did in December, that the economy is expanding at a pace slower than its potential rate and that it would take inflation forecasts into account if it felt the need to stimulate growth further.

"The board is attentive to the projection of inflation and its determinants in considering, if necessary, additional easing measures of monetary policy instruments," the bank said in a statement.

Inflation was 2.86 percent in 2013, near the upper limit of the central bank's 1 to 3 percent target range. The central bank expects inflation to cool to its goal of 2 percent this year.

Central Bank President Julio Velarde said last month that the bank prefers loosening reserve requirements on commercial banks as it has several times over the past year instead of further lowering the benchmark rate.

Peru's economy, which expanded at an annual average rate of 6.5 percent over the past decade, probably grew by 5.1 percent in 2013 as global prices for the Andean country's mineral exports fell, the central bank has said.

The central bank said indicators point to more robust economic growth in the fourth quarter and to a global economic recovery.

Peru is a top producer of copper, gold and silver. Its potential growth rate, the pace at which the economy can expand without stoking inflation too much, has typically been seen at between 6 percent and 6.5 percent.

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