Peru Sees Inflation Returning to Target in 2016, Velarde Says

Reduced pass-through to cause inflation slow to 3.4% to 3.6% this year and ease further in 2016, central bank President Julio Velarde told reporters in Lima on Friday. * GDP is forecast to rise 3.1% in 2015, down from a previous forecast of 3.9%: Velarde * 2016 GDP is forecast to rise 4.2%, down from a previous forecast of 5.3%: Velarde * GDP to rise 3.8% y/y in 2H 2015 * Private investment to fall 5.5% in 2015, though private consumption recovering in July-Aug.: Velarde * Velarde says experts see moderate-to-strong El Nino * Peru has room to keep counter-cyclical policy: Velarde * Peru economy is still growing below potential * Supply-side factors account for most of Peru CPI gains * Bulk of Peru sol volatility already reflected in CPI *NOTE: Peru targets annual inflation of 1%-3% *NOTE: Peru central bank this month raised its key rate by a quarter-point to 3.5% after annual inflation quickened to a three-year high of 4.04% last month