Peru's central bank keeps base rate steady for 29th month

Reuters

LIMA, Oct 10 (Reuters) - Peru's central bank kept itsbenchmark interest rate steady at 4.25 percent forthe 29th straight month on Thursday, as the economy expandsclose to its potential and inflation runs within target range.

All 12 economists surveyed by Reuters had predicted themonetary authority would again keep the rate unchanged.

The central bank said it expects inflation to remain withinits 1-3 percent target range in coming months and the economy tocontinue growing at a healthy pace.

"Current and preliminary indicators of productive activityshow Peruvian economic growth close to its long-term sustainablelevel, while indicators linked to the external market showed aslight recovery, which has favorably affected the prices ofexport products," the central bank said in a statement.

The central bank again said that it could further loosenreserve requirements on banks as it has in recent months toboost liquidity and lending.

Peru is a top global producer of copper, gold, silver andzinc, but softer demand from major buyers like China and weakermineral prices has dampened economic growth this year and setthe stage for the Andean country's first trade deficit in morethan a decade.

The economy expanded 4.5 percent in July, compared with thesame month in 2012, and 5 percent in the first seven months ofthis year. Data for August will be released on Tuesday.

Last year the economy expanded by 6.3 percent, one of thefastest rates in the region.

The central bank has trimmed its forecast for 2013 economicgrowth to 5.5 from an earlier estimate of 6.1 percent.

Peru's potential growth rate, the maximum rate the economycan expand without causing too much inflation, has usually beenseen at around 6 percent or 6.5 percent.

In September consumer prices rose 0.11 percent, leavinginflation for the 12 months through September at 2.83 percent - under the central bank's target ceiling for the first time inthree months.

Last month Central Bank President Julio Velarde said themonetary authority had not ruled out an eventual rate cut toencourage economic growth.

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