Peru keeps rate steady, expects inflation to ease

    The central bank of Peru kept its monetary policy reference rate unchanged at 4.25 percent, as expected, saying inflation that is above its target reflected temporary supply factors in an economy that is operating at close to full potential.
    The Central Reserve Bank of Peru said the decision to maintain the interest rate, unchanged since April 2011, was taken in the context of uncertain financial markets, lower terms of trade and the "prospect of lower growth in both developed and emerging countries."
    Peru's central bank, which has been fighting to restrain the rise in the sol currency, said it still expected inflation to gradually converge to its target range of 1-3 percent in the rest of the year.
    Peru's annual inflation rate rose to 3.5 percent in August from July's 3.3 percent, but the bank said this was mainly due to higher prices of perishable food, which was affected by an adverse domestic climate. Excluding food and energy, the inflation rate was 2.4 percent.
    Peru's economy is among the world's fastest growing, forecast to expand by around 6 percent this year. Gross domestic product grew by 6.0 percent in the first quarter from the 2011 first quarter.
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