UPDATE 2-Peru central bank hikes key rate, warns of inflation
(Adds analysts' comment)
LIMA Feb 11 (Reuters) - Peru's central bank raised the benchmark interest rate for the third straight month on Thursday and warned that rising inflation expectations threatened to trigger a feed-back loop of quickening price hikes.
A majority of analysts polled by Reuters had forecast an increase of the key rate by 25 basis points to 4.25 percent after the annual inflation rate rose to a fresh four-year high of 4.61 percent - well above the bank's 1 to 3 percent target range.
The central bank said that recent price spikes were driven by temporary supply factors but had seeped into the market's outlook.
"These increases in consumer prices have affected inflation expectations, placing them above the target range, which can feed back into inflation," the central bank said in a statement.
The inflation expectations of analysts polled by the central bank have risen to 3.5 percent for 2016 and 3.0 percent for 2017.
The central bank has risen the interest rate four times in the past six months as the currency has tumbled against the dollar amid expectations for tighter monetary policy in the U.S. and worries about China, a major buyer of Peru's key mineral exports.
Pedro Tuesta, an economist with 4Cast, said the exchange rate's ongoing pressure on prices would likely force the central bank to raise the key rate at least once more before August. (Reporting By Mitra Taj; Editing by Bernard Orr, Toni Reinhold)
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