Bloomberg News

Velarde Says Peru Rate in Line With Inflation, GDP Growth

October 25, 2011

(Updates to add Velarde’s comment in fourth paragraph.)

Oct. 25 (Bloomberg) -- The Peruvian central bank’s benchmark interest rate is in line with inflation and the pace of economic growth, bank President Julio Velarde said today.

The bank’s benchmark rate is in “neutral territory” after five straight increases in the first half of the year, Velarde said today in an interview in Toronto. Peru’s rate policy “is slightly above the curve,” Velarde said.

Peru’s economy grew a faster-than-expected 7.5 percent in August on rising consumer demand and a rebound in fishing and mining output. Concern about a global slowdown led the central bank to keep borrowing costs unchanged at 4.25 percent for a fifth month Oct. 6.

South America’s sixth-largest economy will expand at a slower pace next year as European activity falls, Velarde said. Demand for Peru’s textile exports has fallen probably “because of the fear of recession,” he said.

Rising grain prices in the first half of this year and higher fuel costs pushed Peru’s annual inflation rate to 3.73 percent in September, a two-year high.

The central bank targets annual inflation in a range of 1 percent to 3 percent.

The effect of higher commodity prices on the Andean country’s inflation rate will disappear in the first half of next year, Velarde said.

The sol strengthened 0.1 percent to 2.7170 per dollar from 2.7187 yesterday.

--Editor: Robert Jameson

To contact the reporters on this story: Matt Walcoff in Toronto at mwalcoff1@bloomberg.net; John Quigley in Lima at jquigley8@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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