UPDATE 1-Peru's currency woes prevented rate cut: central bank chief
(Recasts, adds details)
By Richard Lough
BUENOS AIRES, March 13 (Reuters) - Peru's central bank chief said on Friday that concerns about the local currency's slide against the dollar kept the monetary authority from lowering the benchmark interest rate to boost the flagging economy.
The central bank weighed cutting the key rate on Thursday, President Julio Velarde said, after inflation eased under its target ceiling and a poll of business and consumer sentiment signaled a slower economic recovery than expected.
"We were discussing it," Velarde told Reuters when asked how close the bank was to cutting the interest rate. "The problem is that a little under 40 percent of loans are in dollars."
The relatively high level of dollarized debt in Peru could spell trouble as the sol currency weakens and the cost of paying it off goes up.
"We're looking to what happens with the exchange rate and what happens to economic activity," Velarde said.
Peru's mining-fueled economy expanded by 1.7 percent in January on the year, Velarde said - slightly under the 2.1 percent figure forecast in a Reuters poll.
The central bank has sold $2.79 billion in the local spot market since the start of 2015 as the sol has slipped 4 percent amid expectations of interest rate hikes in the U.S. mid-year. Continuación...