Peru keeps policy rate at 4¼% with economy growth close to potential

By Toni Weeks

San Diego, July 13 - The board of the Central Reserve Bank of Peru again chose to maintain the monetary policy reference rate at 4¼%.

The board said it based its decision on the fact that inflation's deviation from the target has reflected mainly transitory supply factors and that the economy's growth is close to its potential.

The bank also observed that the decline of terms of trade and in prospects of lower growth in both developed and emerging countries is a reflection of the high uncertainty still present in international financial markets.

Inflation in June fell by 0.04%, contributing to the drop in inflation over the last 12 months to 4.00% from 4.14%. Core inflation, which was recorded at 0.20% in June, accumulated at 3.64% in the same time period, according to a bank news release.

Annual inflation is expected to decline in a sustained manner the rest of the year, with inflation converging to the target range, the bank noted.

The bank maintained overnight deposits at 3.45% and direct repo and rediscount operations at 5.05%.

The bank last raised the rate by 25 basis points from 4% in May 2011.

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