(Adds quote from central bank, context)
LIMA Dec 15 Peru's central bank held the
benchmark interest rate steady at 4.25 percent for the tenth
month in a row as expected on Thursday, but warned that a
drought was fanning inflation and noted a lack of investment in
construction and manufacturing.
All 14 economists polled by Reuters had forecast the rate
hold, which came a day after the Federal Reserve's decision to
hike U.S. interest rates dampened demand for Peru's sol
The annual inflation rate in Peru cooled to 3.35 percent in
November, above the central bank's 1-to-3 percent target range
for the third month in a row.
"The water deficit generated by adverse climatic factors has
been affecting inflation transiently," the central bank said in
a statement, leaving out its usual year-end forecast for
inflation that it had previously put at about 3 percent.
Though surging copper output from new and expanded mines has
been driving an economic recovery, domestic demand has slowed
and year-on-year growth in October was the weakest in a year and
The central bank said that weak investment has dragged on
construction and manufacturing, key to job growth, but that
business expectations were still optimistic.
(Reporting by Mitra Taj; Editing by Chris Reese and James