(Fixes verb in headline to “leaves”)
LIMA, March 10 (Reuters) - Peru’s central bank left the benchmark interest rate unchanged at 4.25 percent on Thursday after three straight hikes and a slight slowdown in inflation.
Nine out of 16 analysts had said they expected another 25-basis-point hike as heavy rains threatened to push up prices again and a surprise surge in growth eased economy worries.
The central bank tightened reserve requirements this month ahead of the decision, a tool it has used as an alternative to changing the interest rate.
A let-up in the currency’s slide, which fanned inflation to a four-year high this year, also eased pressure on the bank for further tightening.
“Inflation has been affected by temporary supply factors such as the prices of some foods and public services and the currency’s depreciation, which has partially reversed,” the central bank said in a statement.
The annual inflation rate eased slightly to 4.47 percent last month, still well above the central bank’s 1 to 3 percent target range.
Julio Velarde, the head of the central bank, said on Tuesday that he expected tamer inflation in the second half of the year and did not see the need to be so aggressive on rates.
But inflation expectations are still above the central bank’s target ceiling, and some analysts believe the bank will have to tighten further later this year.
After its hike last month, the central bank warned that rising inflation expectations threatened to trigger a feedback loop of quickening price hikes. It did not repeat the warning on Thursday.
Pedro Tuesta, an economist with 4Cast, said the bank will likely hold off on hiking in its meeting next month, which falls just after the first-round of presidential elections. (Reporting by Lima Newsroom; Editing by Sandra Maler)