Thursday, November 8, 2012

Peru holds rate steady, sees further decline in inflation

    The central bank of Peru held its benchmark interest steady at 4.25 percent, as expected, saying the deviation in inflation from its target range was due to temporary supply side factors in a domestic environment where growth is close to potential and an external environment that is "highly uncertain."
    The Central Reserve Bank of Peru (BCRP), which has held interest rates steady since April 2011,  also said inflation, which again fell in October due to a reversal of earlier supply shocks, will gradually trend toward 2 percent.
    Peru's inflation rate fell to 3.25 percent in October, the lowest this year, from 3.74 percent in September. Inflation has exceeded the central bank's upper tolerance range since June 2011.
    The central bank targets inflation of 2.0 percent, within a one percentage point tolerance band.
    BCRP said indicators show that Peru's economy has stabilized around its long-run sustainable level although sectors linked to exports show a weak performance and there is uncertainty about the global economic growth rate.
    Peru's economy, the fastest growing in South America this year, expanded by an annual 6.1 percent in the first and second quarters of this year and the finance minister said recently that Gross Domestic Product expanded about 6.4 percent in the third quarter.
    Third quarter data are first scheduled for release later this month.
    Peru's economy is forecast to expand by 6 percent, or slightly more, this year,  down from 6.9 percent in 2011.


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