Thursday, May 8, 2014

Peru holds rate, inflation seen converging to target

    Peru's central bank maintained its policy reference rate at 4.0 percent, saying inflation is initially forecast to remain close to the bank's upper band of its target range but then converge to the 2 percent midpoint.
    The Central Bank of Peru (BCRP), which last cut its rate by 25 basis points in November as a preventative move against further economic slowdown, said indicators of activity and surveys on macroeconomic expectations point to "dynamism in economic activity, although a lower rates than expected."
    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.
    The headline inflation rate rose to 3.52 percent in April from 3.38 percent in the previous month while the rate of inflation without food and energy was 2.83 percent.
    BCRP targets inflation at a midpoint of 2.0 percent, plus/minus one percentage point.

    Earlier this week central bank Governor Julio Velarde told Reuters that interest rates will likely be maintained in coming months unless inflation rises due to demand or there is a strong slowdown in economic activity.
    Last month the BCRP lowered its 2014 growth forecast to 5.5 percent from a previous 6.0 percent. In 2013 the economy grew by 5.6 percent, down from 6.0 percent in 2012.
    The forecast for end-year inflation was raised to 2.5 to 3.0 percent this year from 1.5-2.5 percent due to higher food prices. In 2013 inflation was 2.9 percent.


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