Peru Rates Seen Hitting New Low

Market consensus is that Peru will slash its monetary policy rate by 50bp to 3.50% Thursday. “We expect a 50bp to take policy rates to 3.50%, a level not seen since January 2006,” says Morgan Stanley. The shop adds that even if the central bank eases further, it will be forced to hike the rate early in 2010, as inflation may prove to be “stickier” than expected. In April, it says, inflation was 4.8% while the target is 1%-3%. Bank of America-Merrill Lynch also expects a 50bp cut this month and another 50bp reduction in July. It also forecasts inflation could reach 2.8% in Q4. Elsewhere, Bulltick predicts 100bp easing and adds that inflation should fall well within target this year on the back of a decrease in food and metals prices.