Nov. 5 (Bloomberg) -- Peru’s central bank kept its benchmark lending rate at a record low for a third straight month to stoke a nascent recovery as inflation remains below target.

The seven-member board, led by bank President Julio Velarde, kept its reference rate at 1.25 percent, matching the forecast of all 16 economists surveyed by Bloomberg.

“Unless there are significant changes in the projections for inflation and its determinants, new adjustments in the reference rate are not foreseen,” the bank said today in a statement accompanying its decision.

Seven interest rate cuts earlier this year and a $3 billion stimulus plan, combined with rising demand for Peru’s exports, have restored Latin America’s sixth-biggest economy to expansion, said Neil Shearing, an emerging market analyst for Capital Economics Ltd. in London.

“Rate cuts aren’t needed as the economy is poised to grow at a healthy pace,” Shearing said in a telephone interview. “The government’s stimulus plan should gain traction in the coming months and capital inflows will get stronger.”

Brazil, Mexico and Chile have all held their benchmark rates unchanged since last cutting in July, citing improving economic growth. Peru cut the overnight rate by 5.25 points this year to spur consumer spending after six increases in 2008 pushed borrowing costs up to the highest since 2001.

Bank Lending

Fishing, electricity and cement output increased in September while unemployment fell to 7.8 percent from 8.3 percent in August, according to Peru’s statistics agency. Bank lending increased 7.5 percent in the third quarter from a year earlier as consumer spending rose.

Before the central bank’s rate cuts began to take effect in the second half of 2009, the economy shrank for the first time in eight years in the second quarter.

Peru’s economy should grow at a faster pace during the remainder of this year and may expand as much as 4.5 percent in 2010 as companies restart investment, Finance Minister Luis Carranza told reporters Nov. 3.

“The worst has passed and the economy has started growing again,” said Gonzalo de las Casas, chief investment officer at AFP Integra, the Andean country’s largest private pension fund. “Peru is the only country in Latin America that’s going to see growth this year.”

Prices of copper, zinc, lead, tin and silver, which account for 60 percent of Peru’s export revenue, have all gained at least 37 percent this year as increases in U.S. and Chinese manufacturing signal rising demand for industrial materials.

Crisis ‘Over’

“Metal prices are improving,” Hans Flury, head of Peru’s National Society of Mining, Petroleum and Energy, said in an Oct. 27 interview in Lima. “It’s a sign that the crisis is over and overseas markets could start to import more.”

Mining exports rose 1.9 percent in September after gold and lead prices increased, exporter association Adex said.

The Peruvian sol has advanced 8.3 percent this year, the seventh-best performance against the dollar among 26 emerging- market currencies tracked by Bloomberg.

In trading today, the sol gained 0.2 percent to 2.8955 per dollar from 2.9007 yesterday.

The central bank bought $910 million on the currency market last month in a bid to slow the sol’s gains.

Monthly inflation accelerated for the first time in two months in October on an increase in food and clothing prices.

Consumer prices rose 0.12 percent last month from September, after falling 0.09 percent and 0.21 percent in September and August. In the 12 months through October, prices rose 0.71 percent, the slowest pace since April 2007.

Inflation Outlook

Inflation will remain below 1 percent for the remainder of this year and will hover within the bank’s target range of 1 percent to 3 percent in 2010 and 2011, Velarde said last week.

“I don’t foresee inflationary pressures in the near future,” said Alejandro Perez-Reyes, who manages $7 billion at Peru’s second-largest private pension fund, AFP Prima. “The central bank is comfortable with its policy of keeping rates low to kick-start consumption.”

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net

Last Updated: November 5, 2009 18:01 EST