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Peru Keeps 4% Key Rate After Measures to Boost Investment

March 13 (Bloomberg) -- Peru kept borrowing costs unchanged on expectations inflation will ease from a 20-month high while lower reserve requirements spur growth.

The seven-member board, led by bank President Julio Velarde, maintained the overnight rate at 4 percent for a fourth straight month, matching the estimates of all 21 economists surveyed by Bloomberg.

Policy makers on March 1 cut the reserve requirement ratio for the seventh time in eight months to boost lending as falling copper and gold exports damp private investment. Annual inflation quickened to 3.78 percent last month from 3.07 percent in January, as food costs rose. Consumer prices are under control and the economy doesn’t need more stimulus as mining output picks up, Velarde said in a March 6 interview.

“Inflation is forecast to remain close to the upper limit of the target range initially because of the lag effect of supply shocks and to subsequently trend to 2 percent,” policy makers said in their statement posted on the central bank’s website.

Peru’s economy expanded 5.3 percent last year, the slowest pace since 2009, after a slump in exports from the world’s third-largest copper producer sparked slowdowns in construction and retailing.

Policy makers said they are “ready to consider additional monetary policy measures if needed,” according to their statement posted on the central bank’s website.

‘Private Investment’

Growth last year was revised up from 5 percent last week after the statistics agency changed its method for calculating gross domestic product.

Exports fell 18 percent in January from the year earlier as copper and gold sales plunged, leaving the Andean nation with a record trade deficit of $740 million, the statistics agency said March 10.

South America’s sixth-largest economy probably expanded 4.9 percent in January, after 5 percent growth in December, according the median estimate of 12 analysts in a Bloomberg survey. The agency is scheduled to release the data tomorrow.

The central bank forecasts economic growth of 6 percent this year and inflation of about 2 percent, Velarde said in a Feb. 3 interview.

“The export decline in January was much more due to prices than volumes so it shouldn’t affect GDP growth,” said Pablo Nano, an economist at Scotiabank Peru in Lima. “Imports are likely to recover in the second half of the year as private investment is gradually recovering.”

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

To contact the editors responsible for this story: Philip Sanders at psanders@bloomberg.net Robert Jameson

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