November 9, 2016 / 1:44 AM / 2 years ago

Peru cenbank manager says economy needs expansive policies

LIMA, Nov 8 (Reuters) - The general manager of Peru’s central bank said the economy needs expansive monetary and fiscal policies through 2017 to bolster growth that he expects to slow to about 3 percent year-on-year in the fourth quarter.

Renzo Rossini, who is not part of the bank’s decision-making board but has been its manager since 2003, said that both the central bank and the finance ministry must work to ensure economic growth improves.

“It’s necessary to maintain expansive policies,” Rossini said in a presentation at a banking forum.

Peru’s central bank has kept the benchmark interest rate steady at 4.25 percent for the past eight months as inflation has hovered near the upper limit of its target range and copper output has sustained economic growth amid weak domestic demand.

All analysts polled by Reuters expect the bank to leave the key rate unchanged again this week.

The president of the central bank told Reuters last month that the bank may lower the interest rate next year if government reforms fail to revive domestic demand and inflation is low.

Rossini said inflation that rose to 3.41 percent last month is expected to cool to about 3 percent by year end - slightly higher than the bank’s previous estimates for 2.8 or 2.9 percent.

Slumping private investments amid the low commodity prices of recent years have dragged on economic growth in Peru, the world’s third-biggest copper producer.

Rossini said red tape must be slashed to help spur investments and that concerns about China, Peru’s top trade partner, have eased as growth has stabilized there.

“It’s a good time now that mineral prices have stopped falling. It’s the end of this negative period that was marked by questions about China,” Rossini said.

Reporting By Teresa Cespedes; Writing by Mitra Taj; Editing by Cynthia Osterman

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