(Adds official reading for July growth, quote from minister, context on slowdown)
LIMA, Sept 15 (Reuters) - Peru’s finance minister said on Tuesday that the central bank’s decision last week to raise the benchmark interest rate put more pressure on the government to take action to ensure the economy emerges from a sharp slowdown.
Finance Minister Alonso Segura said the 25-basis-point increase to 3.50 percent would have some impact on growth.
“But we believe it will be marginal, and we’re going to watch what decisions the central bank makes going forward,” Segura said on local broadcaster RPP.
Despite still-sluggish growth, the central bank raised the key interest rate to curb inflation, which has been accelerating as Peru’s currency has slid against the dollar.
Only three out of 14 economists had predicted the rate hike.
“It puts some more pressure on fiscal policy to take action to try to mitigate the impact of a drop or slowdown in private investment,” Segura said.
“We think the central bank is doing what it has to do and that the Peruvian government is going to do what it has to do,” Segura said, without offering specifics.
The government of President Ollanta Humala has struggled to encourage economic activity that has slowed on weak mineral prices and a drop in investments. Peru is the world’s third-largest copper producer and depends on mining for its growth.
Despite tax cuts, stimulus spending and government pledges to cut red tape, the economy expanded 2.35 percent last year, a steep downturn from a pace of more than 5 percent in previous years.
The economy has shown signs of recovering in recent months. It expanded by 3.26 percent year-on-year in July, the third-strongest monthly growth rate this year, on surging copper production. The expansion for the past year rose to 2.07 percent.
But the rebound could be knocked by the El Nino weather pattern, a potential downgrade of Peru’s bourse to “frontier market,” a pause in investments ahead of presidential elections in April and softening demand for minerals from China.
The finance ministry expects a 3 percent expansion in 2015, still below a potential growth rate that the central bank now sees at 4.0 to 4.5 percent.
Segura said his ministry had expected the interest rate increase and that the recently proposed 2016 budget was written with it in mind. “It wasn’t a surprise,” he said. (Reporting by Mitra Taj; Editing by Bernadete Baum and Lisa Von Ahn)