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Peru Consumer Prices Fall for First Time in 10 Months

Oct. 1 (Bloomberg) -- Peruvian consumer prices fell for the first time in 10 months in August as food prices continued to ease.

Consumer prices fell 0.03 percent last month from August, according to a statement published in the official gazette. Economists expected a 0.25 percent increase, according to the median estimate of 14 analysts surveyed by Bloomberg. From a year earlier, prices rose 2.37 percent, less than the median forecast of 2.60 percent of nine analysts.

Monthly food price inflation has been slowing since the second quarter as supply returns to normal after heavy rains damaged crops and transportation routes at the start of the year, said Mario Guerrero, an economist at Scotiabank Peru. Central bank Governor Julio Velarde last month said policy makers may begin to slow the pace of interest rate increases as concern that the economy might be overheating has eased.

“There’s no pressure on those prices tied to domestic demand,” Guerrero said in a phone interview from Lima. “Because of the inflation data, we see a 25 basis-point increase or even a pause,” by the bank next week, he said.

Policy makers, who raised Peru’s reference rate to 3 percent from 2.5 percent last month, can take time to push borrowing costs “close to” 4 percent if they don’t see inflationary pressures and economic growth slows, Velarde said.

South America’s sixth-largest economy expanded less than analysts expected in July after fishing output declined and the government tempered spending growth.

The central bank forecasts an annual inflation rate of 2.5 to 3 percent for this year, within its 1 percent to 3 percent target range. Peruvian inflation may be the lowest in Latin America this year and next, according to the bank.

Peru’s sol closed little changed yesterday at 2.7861 per dollar from 2.7867 on Sept. 29.

To contact the reporter on this story: 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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