LIMA: Peru's central bank will likely hold monetary policy unchanged in the coming months as the economy is seen growing near its potential and inflation will probably not be driven higher by consumer demand, the bank's president told Reuters on Monday.
The central bank will decide Thursday whether to change the key benchmark rate, which it has held at 4 percent since surprising the market in November with a rate cut for the first time in more than four years.
Responding to a question about another potential reduction in the interest rate, Central Bank President Julio Velarde said such a move is unlikely anytime soon.
"We do not see the need to change monetary policy in the coming months unless inflation rises due to demand or there is a strong slowdown in economic activity," Velarde said in an interview, adding that those scenarios seem far-fetched right now.
Velarde said the mineral exporter's economy is expected to grow "very close" to its potential rate in the months ahead, when inflation will probably start cooling toward the bank's target range midpoint of 2 percent.
The annual inflation rate ran slightly above the central bank's target range of 1 percent to 3 percent in the first four months of this year.
Peru's potential growth rate, the pace at which the economy can expand without stoking inflation, is widely seen at between 6 percent and 6.5 percent.
Peru's economy logged growth of about 5 percent in January and February - the most recent data available - compared to the same period last year.
Velarde said the central bank might resume loosening reserve requirements on commercial banks in the near term to boost liquidity after leaving the rules unchanged this month.
The central bank revised its 2014 growth forecast to 5.5 percent from its previous expansion view of 6 percent last month, suggesting a more prolonged economic slowdown than initially expected.
But Velarde said economic growth, which slowed to 5.6 percent last year, will likely pick up to expand by more than 6 percent in 2015 and 2016 amid stronger mining activity.
Softer demand for metals and weaker prices for copper, gold and silver hit Peru's exports hard in 2013, dampening growth and appearing to mark an end to a decade of expansion that topped 6 percent on average per year.
Gross domestic product was initially described as rising 5 percent in 2013, but that figure was revised upward after a new method for calculating growth was adopted.
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