UPDATE 1-Peru central bank head forgoes raise after president's rebuke
(Recasts with central bank chief's decision not to take pay increase)
By Marco Aquino and Mitra Taj
LIMA Nov 5 (Reuters) - The head of Peru's central bank decided not to take a pay raise, aiming to diffuse tension with the government after President Ollanta Humala criticized his 6 percent hike in a rare public rebuke.
The central bank said on Wednesday that its president, Julio Velarde, would not accept the salary increase his board recently granted all bank employees after two years of flat wages.
Humala, a former left-leaning military officer who turned to the right after assuming office in 2011, scolded Velarde for the pay hike because he was already the highest-paid public official in Peru.
The raise would have boosted Velarde's salary to 617,344 soles ($210,913), nearly triple Humala's 224,000 soles ($76,528) per year.
In a letter to Velarde made public by local media, Humala urged Velarde to reject the raise to preserve the bank's image.
The central bank defended the pay increase as reasonable and said Velarde's decision was personal and did not erode the institution's autonomy.
"What is most important in current circumstances is to work toward a solution to economic problems, avoiding fruitless arguments," the bank said in a statement. Continuación...