LIMA: Inflation in Peru during November will likely be higher than what the central bank would like due to an increase in some food prices, bank president Julio Velarde said on Wednesday, a sign an interest rate hike may be in the works.
Velarde said that Peru's economy is growing below its potential of 4.5 percent and underscored that the sol currency has been hit by a sharp drop in prices for copper, one of the Andean country's top exports.
The sol's 13.6 percent slide against the US dollar so far in 2015, to a near 10-year low, has stoked inflation and prompted the central bank to raise its benchmark rate 25 basis points in September.
"I think we're not going to be too happy (with November inflation) because prices for chicken have risen sharply," Velarde said following a presentation at a business forum.
"Inflation will probably be beyond what we would like," he said.
The bank might raise the benchmark rate in December if inflation rises quicker than expected, the bank's chief economist Adrian Armas said on Nov. 13, a day after the bank held the rate steady at 3.50 percent for the second month in a row.
The national statistics agency will publish the November inflation data on Dec. 1. Central bank general manager Renzo Rossini said on Nov. 18 that a spike in food prices this month and the impact of the sol currency's depreciation on prices would push up the inflation rate in what remains of 2015.
Referring to the sol currency's depreciation, Velarde said the real exchange rate had not strayed away from its fundamentals.
"If we've had a sharp depreciation it's because copper prices have dropped markedly over the last two weeks," he said.
Velarde reiterated that he was "concerned" about Peru's fiscal deficit considering the steep drop in metals prices.
Peru is the globe's third biggest copper producer and also a significant exporter of silver and zinc.
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