UPDATE 1-Peru central bank expects 'low' inflation rise in October
(Recasts throughout with reaction from the central bank)
LIMA Oct 16 (Reuters) - The central bank expects a "low" monthly increase in consumer prices in October that should help bring rising inflation expectations back in line with its more optimistic forecast.
Analysts polled by the central bank put inflation at 3.8 percent in 2015 and 3.3 percent in 2016, up from 3.5 percent and 3.0 percent, respectively. The central bank expects inflation, now at 3.9 percent, to cool back into its 1 percent to 3 percent target range next year.
But the survey was carried out before September's sharp inflationary slowdown was published, said central bank chief economist Adrian Armas.
"We also expect a low monthly inflation rate" in October, Armas told reporters on a conference call.
"This information should make the market begin to lower its inflation expectations," Armas said. "Obviously if it doesn't, the probability that the central bank withdraws monetary stimulus more quickly will grow."
The central bank hiked the benchmark interest rate last month to re-anchor inflation expectations after the currency's depreciation squeezed prices.
The central bank kept the key rate steady at 3.50 percent on Thursday, a level it considers expansive.
Armas reiterated that the central bank's bias is toward a gradual tightening and that it would seek to avoid consecutive hikes.
The timing would depend on key data, Armas said.
"If inflation slows more quickly than expected, then the interest rate can be at its current level longer," Armas said. (Reporting By Teresa Cespedes; Editing by Chris Reese and Meredith Mazzilli)
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