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Peru’s Inflation Slows to a 16-Month Low as Food Costs Decline

Peru’s inflation slowed more than expected to a 16-month low in October on declining food costs, while remaining above the central bank’s target range.

Consumer prices increased 3.25 percent from a year earlier after a 3.74 percent gain in September, the national statistics agency said in an e-mailed report today. The median estimate of eight analysts surveyed by Bloomberg was for a 3.47 percent increase. Prices fell 0.16 percent from the previous month.

The central bank has maintained its benchmark interest rate at 4.25 percent since May 2011 while it increased reserve requirements Oct. 30 for the third time in three months to cool credit demand. Policy makers target inflation at 2 percent plus or minus 1 percent.

“The central bank is tightening monetary policy in a preventive manner in a context of strong domestic demand,” Hugo Perea, the chief economist at BBVA Banco Continental, said in a phone interview from Lima before the release. “Inflation expectations aren’t aligned with the central bank’s target.”

Food and drink prices fell 0.35 percent from the previous month after improved domestic harvests boosted supply of some vegetables, today’s report showed.

Economists forecast inflation of 3.3 percent this year and 2.8 percent in 2013, according to a Sept. 30 central bank survey. Gross domestic product rose 6.4 percent in the third quarter after a 6.1 percent rise in the first half of the year, Finance Minister Miguel Castilla said Oct. 29.

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