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


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

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

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

"Current and preliminary indicators of productive activity show Peruvian economic growth close to its long-term sustainable level, while indicators linked to the external market showed a slight recovery, which has favorably affected the prices of export products," the central bank said in a statement.

The central bank again said that it could further loosen reserve requirements on banks as it has in recent months to boost liquidity and lending.

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

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

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

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

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

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

Last month Central Bank President Julio Velarde said the monetary authority had not ruled out an eventual rate cut to encourage economic growth.