”Peru's inflation rate will end the year ‘near’ the central bank's 1 percent to 3 percent target as food prices ease,” central bank President Julio Velarde said.

Increased productivity and lower prices for some foods are moderating inflation, Velarde said in an interview in Washington. The bank, which has raised its benchmark reference rate twice since July, could act again if needed, Velarde said.
“The dynamism of productive private investment in Peru has kept inflation from shooting up,” Velarde said. “Our monetary policy seeks to bring inflation back down to our target.”
Private investment will grow 23 percent this year after rising 20 percent in 2006, spurring 8 percent economic growth, Velarde said. Foreign investment will total $4.5 billion this year, he said.
Peru's consumer prices climbed 2.8 percent in the 12 months through September, compared with 2.2 percent through August, as crude oil and wheat prices surged. Peru is a net importer of both commodities.
The bank raised its benchmark reference rate by a quarter percentage point at its July and September policy meetings. It now stands at 5 percent.
The bank will continue to buy dollars on the foreign exchange market to slow the sol's gains, Velarde said. Peru's international reserves, which have risen by $8 billion to a record $24.6 billion this year, are 80 percent invested in dollar-denominated assets and 20 percent in euros, he said.
Peru's trade surplus will be equivalent to 8 percent of gross domestic product this year. This year's fiscal surplus should reach 2 percent, the same as last year, he said.
“We don't see any severe vulnerability” in the economy, Velarde said. “There's general growth across the board and the business class is optimistic.” The Peruvian sol strengthened 0.1 percent to 3.0195 soles to the dollar. The sol has gained 5.8 percent this year.
The yield on Peru's 9 7/8 bond due 2015 fell 4 basis points, or 0.04 percentage point, to 5.749 percent. The bond's price, which moves inversely to its yield, rose 0.25 cent to 124.25.
(Source: Bloomberg)