(Adds comment from central bank chief on Fed decision, context on rising inflation and rate hike, revised cenbank growth forecasts)
By Marco Aquino
LIMA, Sept 18 (Reuters) - The president of Peru’s central bank said Friday that the inflation rate would likely cool to between 3.4 percent and 3.6 percent by the end of 2015 - still above target and higher than previously expected.
Julio Velarde added that inflation should finish 2016 back in its 1 to 3 percent tolerance range.
The central bank had forecast 2015 inflation at its goal of 2 percent in May. Since then the sol currency’s slide against the dollar amid expectations of rising U.S. interest rates has pushed the annual inflation rate to 4 percent.
Velarde said the Federal Reserve’s decision on Thursday to hold rates at record lows has not changed his bank’s monetary policy stance.
The central bank unexpectedly raised the benchmark interest rate last week and said it would consider additional increases if needed to re-anchor rising inflation expectations.
Peru’s central bank is one of the first to raise rates among peers torn between a currency-driven spike in inflation and weak economic growth.
The central bank now sees growth in the global minerals exporter recovering more slowly than previously forecast because of a downturn in investments.
Public investments will likely fall by 2 percent this year instead of growing 4 percent as forecast in May, the central bank said. Private investments will drop by 5.5 percent instead of rising 1 percent.
“Business expectations have not recovered, they’ve even gotten slightly worse,” Velarde said at a press conference.
But an expected 23 percent rise in copper output this year should support an economic expansion of about 3.1 percent in 2015 and 4.2 percent in 2016, the central bank said. In 2017, Peru’s copper output should be 2.3 million tonnes.
In 2014, the economy grew by 2.35 percent, a sharp downturn from rates that tended to top 6 percent during a mining boom in the previous decade. (Reporting By Marco Aquino, Writing by Mitra Taj; Editing by Christian Plumb and Chizu Nomiyama)