Peru annual inflation nearly 5 percent

Peru’s average national inflation rate for the first eight months of 2008 is bordering on 5 percent, beyond the Central Bank’s set goal of 2 percent, and rose slightly from 0.56 percent in July to 0.59 percent in August, reported the country’s National Statistics Institute, or INEI, on Monday.

“This year we will not achieve the goal set by the Central Bank, which is 2 percent per year,” added Izquierdo. “We have largely exceeded this.”

Though the bank fixed its interest rate at a 5-year high of 6.25 percent in August and has lifted deposit requirements for borrowers in an attempt to control inflationary pressures, Peru’s inflation rate registered at an accumulated 4.7 percent since January.

According to economist Jorge Gonzáles Izquierdo, the rising prices of food on the international market and increased internal spending are the main catalysts of the inflation spike, which has affected Peru President Alan García’s approval rate, now standing at 20.3 percent.

“The rising cost of chicken is due to two factors,” said Izquierdo in comments to Canal N. “On the one hand there are international factors such as the purchase of corn and soya, whose prices have been increasing. But I believe that, more importantly, (inflation) is being influenced by an increased spending capacity… everything is subject to internal (domestic) spending.”

Peru’s Central Bank anticipates closing at approximately 5.5 percent by the end of this year, and lowering inflation to 2 percent by mid-2009.

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