Thursday, August 8, 2013

Peru holds rate steady, sees inflation back in range in Q3

    Peru's central bank held its policy reference rate steady at 4.25 percent, as expected, saying it expects inflation to return to the bank's target range in the third quarter due to better food supply and inflation expectations that are anchored to the range.
    The Central Bank of Peru (BCRP), which has held rates steady since April 2011, also said the board's decision was based on economic growth being close to the economy's potential growth level, the persistence of uncertainty over international financial conditions and that the rate of inflation was affected by temporary supply factors.
    The external market is still weak and this affects the prices and volumes of export products, it added.
    In July Peru's headline inflation rate rose to 3.24 percent in July from 2.77 percent in June, above the central bank's target range of 1.0 to 2.0 percent. The bank said the rise in inflation was due to higher prices of some perishable food products and transportation.

    In the first quarter, Peru's Gross Domestic Product rose 2.1 percent from the previous quarter for annual growth of 4.8 percent, down from 5.9 percent in the fourth quarter.
    Since April the central bank has been making its reserve requirements more flexible to "foster a more orderly evolution of credit and promote increased financing resources in soles," BCRP said, adding this had released domestic currency funds of 1 billion soles and foreign currency funds that total $150 million.
    The central bank estimates that another $200 million would be released the rest of the year.
    "If necessary, the Board will adopt additional measures to make the regime of required reserves more flexible," the bank said.


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