Peru holds rate steady, says inflation rise was temporary

    The Central Reserve Bank of Peru (BCRB) held its policy reference rate steady at 4.25 percent, as expected, saying the recent rise in inflation was merely temporary and the economy was growing close to its potential rate.
    "Moreover, uncertainty remains in international financial markets, which is being reflected in the decline of terms of trade and in prospects of lower growth in both developed and emerging countries," the central bank said in a statement following a meeting of its board.
    Inflation eased to an annual rate of 3.28 percent in July from 4 precent in June, showing that supply factors that had pushed up inflation were continuing to reverse, the bank said.

    "Despite this price rise, inflation is expected to gradually converge to the target range the rest of the year," the bank said.
     The BCRB targets inflation of 2 percent, plus or minus one percentage points and the recent rise was mainly due to higher international grain prices from drought, including the United States.
     The bank has kept rates unchanged since April 2011 
     The president of BCRB said earlier this month that he expected Peru's economy to expand over 6 percent in June following an annual rate of 6.5 percent in May. The economy grew by 6.9 percent in 2011 and is forecast to be the fastest growing economy is South America this year.
    www.CentralBankNews.info