June 15, 2018 / 7:15 PM / 4 months ago

UPDATE 1-Peru central bank to ease dollar reserve requirements

(Recasts with comments from central bank president)

By Teresa Cespedes

LIMA, June 15 (Reuters) - Peru’s central bank is planning to make a “very small reduction” to banking reserve requirements for dollar deposits to counter the impacts of higher interest rates in the United States, the bank’s president said on Friday.

Julio Velarde added that the central bank will keep the foreign currency reserve requirement “relatively high” as a buffer against an unlikely run on dollars in one of Latin America’s most stable economies.

“It’s going to be a very small reduction,” Velarde told journalists after presenting the bank’s quarterly inflation report. “At any rate, it’s prudent for banks to maintain a good portion of deposits at the central bank.”

The central bank last eased dollar reserve requirements in April, when it lowered the rate one percentage point to 36 percent as part of a series of reductions since early 2017.

The sol currency closed bidding stable on Friday, but has weakened more than 1 percent against the dollar this year.

Velarde added that he expects the economy to have grown 5 percent year-on-year in the second quarter, which would mark the fastest quarterly growth rate in four years, according to central bank data.

The central bank held its 4 percent forecast for economic growth this year, but raised its view for next year’s expansion to 4.2 percent from 4 percent previously. (Reporting By Teresa Cespedes, Writing By Mitra Taj Editing by Chizu Nomiyama and David Gregorio)

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