Peru central bank may tighten again

LIMA (Reuters) - Peru may tighten monetary policy further to keep prices stable if external shocks cause inflation to speed up, Peruvian Central Bank President Julio Velarde said on Friday.

"If inflationary pressures start to accelerate, we will take measures, and among those could be the interest rate or bank deposit requirements," said Velarde, who spoke in Lima at the Reuters Latin America Investment Summit. "We aren't ruling anything out."

Economists expect price rises to slow in March after spiking 0.91 percent in February, a four-year high that pushed inflation for the 12 months through February to 4.8 percent.

Velarde said the Andean economy, which grew 9 percent last year, could overheat if domestic demand continues to surge.

"There is a risk of overheating if internal demand keeps growing at a double-digit pace," he said.

Velarde said he expects the economy to grow 7.5 percent in 2008, higher than a previous estimate of 7 percent.

(For summit blog: summitnotebook.reuters.com/)

(Reporting by Teresa Cespedes and Terry Wade)