Thursday, April 10, 2014

Peru holds rate, H1 growth to be lower than expected

     Peru's central bank maintained its monetary reference rate at 4.0 percent, as expected, and said recent data and surveys pointed to economic growth that would be lower than expected in the first  half of this year.
    The Central Bank of Peru (BCRP), which last cut its rate by 25 basis points in November as a preventative move, also reiterated that inflation was forecast to remain close to the upper band of its target range due to the lagging effect of supply shocks but then converge toward 2 percent, the midpoint of the central bank's 1-3 percent tolerance range for inflation.
    Peru's inflation rate eased to 3.38 percent in March from 3.78 percent in February, with inflation without food and energy dropping to 2.78 percent from 2.96 percent.
   Last week a spokesman for the central bank said inflation this year is likely to be around 2.4 percent of 2.5 percent instead of 2 percent as previously estimated. In 2013 inflation was 2.8 percent.
    The BCRP, which has been lowering its reserve requirements several times over the past year, added that "if necessary, it will implement additional measures to ease its monetary policy instruments."
    On April 1 the central bank lowered the reserve requirements on bank accounts in the sol currency to 12.0 percent from 12.5 percent to improve credit conditions.

    Peru's Gross Domestic Product expanded by 1.8 percent in the fourth quarter of last year from the third quarter for annual growth of 5.2 percent, up from 4.5 percent.
    In January the economy grew by an annual 4.23 percent, but BCRP President Julio Velarde said last month that growth in February and March would definitely be faster than January, which was affected by a dip in output from a large mine.
    Velarde also said growth this year was expected to reach 6 percent, or 5.9 percent, though tepid economic activity in China, the biggest buyer of Peruvian metals, could lead to lower growth.
    In 2013 Peru's economy grew by 5.02 percent and the International Monetary Fund forecasts growth this year of 5.5 percent and 5.8 percent in 2015.


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