July 11, 2008 / 12:34 AM / 10 years ago

UPDATE 2-Peru central bank raises benchmark rate to 6 pct

(Adds quote from economist)

LIMA, July 10 (Reuters) - Peru’s central bank raised its benchmark interest rate on Thursday after a monthly monetary policy meeting to 6 percent from 5.75 percent, the latest in a string of measures taken to curb inflation.

The rate is now at its highest level in at least 5 years, and the central bank also said it increased bank deposit requirements for lenders in a bid to tighten the money supply.

Peru’s economy, lifted by exports of high-priced minerals and surging domestic demand, has been growing about 9 percent a year.

But inflation has been picking up, pressured by imported commodities, and the government has been tightening monetary policy almost monthly since January.

“This decision — along with previous measures taken this year — aims to prevent high international food and fuel prices from affecting inflation expectations, against a backdrop of fast growth in public and private spending,” the central bank said in a statement.

Starting in August, the central bank said the minimum deposit requirement for bank accounts will rise to 9 percent from 8.5 percent, and the marginal deposit rate on dollar accounts will rise to 49 percent from 45 percent.

Some said the increase in reserve requirements and the rate increase showed the central bank is being especially vigilant.

“The central bank is sending a message that it’s ready to use all available tools to slow inflation expectations,” said Robert Flores, an economist at the Centura SAB brokerage in Lima. “It also wants to moderate domestic demand so that it doesn’t contribute to price increase.”

In a Reuters survey, two of 11 economists polled said the it would likely raise the rate to 6.25 percent, while seven said the bank would probably increase it to 6.0 percent. Two said they thought the rate would remain steady.

June inflation was a higher-than-expected 0.77 percent, which pushed the country’s inflation for the first six months of 2008 up to 3.51 percent.

The central bank uses inflation to help guide interest rate decisions. Its annual inflation target is 2 percent, plus or minus a tolerance band of one percentage point. Economists expect inflation of more than 4 percent this year.

Reporting by Teresa Cespedes and Dana Ford; Writing by Terry Wade; Editing by Carol Bishopric, Richard Chang

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