UPDATE 1-Peru central bank raises base rate to 4 pct

* Central bank raises benchmark for 4th straight month

* Measure to counter high international food, fuel prices
(Adds central bank comment, inflation background)

LIMA, April 7 (Reuters) – Peru’s central bank on Thursday
raised its benchmark interest rate (PECPI=ECI: Quote, Profile, Research) to 4 percent
from 3.75 percent, the fourth straight hike to control
inflationary expectations.

Ten economists in a Reuters survey predicted the
25-basis-point hike to 4 percent while three forecast borrowing
costs would rise 50 basis points to 4.25 percent.

“This measure aims to limit the impact of higher
international food and energy prices on inflation
expectations,” the central bank’s report said.

Consumer prices in Peru rose 0.7 percent in March due to
higher food prices, their fastest pace in nearly three years.

Peru Finance Minister Ismael Benavides said on Thursday he
expects annual inflation of between 3 and 3.5 percent,
surpassing the central bank’s 1 to 3 percent target range.

Last week, Central Bank President Julio Velarde told
Reuters that aggressively hiking rates in uncertain times was
“like putting on the brakes on an icy road,” suggesting the
tightening cycle will continue to be gradual. [ID:nN01151534]

Economists say a neutral benchmark in Peru would be between
4 and 4.5 percent.

Velarde also said the effective interest rate was already
around 4.75 percent and basically neutral because the central
bank has also increased bank deposit requirements three times
this year to tighten the money supply.

(Reporting by Patricia Velez and Caroline Stauffer; Editing
by Richard Chang)

UPDATE 1-Peru central bank raises base rate to 4 pct