Continued Rate Hikes Seen in Peru

Looking ahead, Peru’s central bank still has room for more monetary tightening, says Alfredo Coutino, senior economist at Moody’s. Last week, it raised the benchmark rate to 6.00% from 5.75%, and will likely continue on this path to avoid a deterioration in inflation expectations. “It should not be a surprise to see one or two more hikes in the reminder of the year,” says Coutino. The economist says the central bank acted appropriately last week. “The central bank’s monetary action is justified, particularly because monetary conditions continue to be expansionary, with the interest rate still staying below neutrality.” Inflation has picked up in Peru, reaching 5.7% in June, nearly tripling its mid-point target of 2%.