Peru Rates Seen on Hold

Peru’s central bank is expected to keep rates on hold at 1.25% today, though consensus points to 200bp tightening, to 3.25%, by year-end. Bulltick believes the rate will stay on hold until late in the third quarter. The shop explains that inflation in March came in at a 0.28% monthly increase compared to February’s increase of 0.32% and is demonstrative of the lack of demand-led inflationary pressures as yet in the Peruvian economy. “This inflation number is further evidence that the central bank, contrary to much market speculation, will not be raising rates in the near term, but rather wait until for some meaningful increase in activity and inflation expectations before unwinding expansionary policy,” Bulltick says. Morgan Stanley meanwhile expects the central bank to embark on a more aggressive monetary policy tightening campaign in the second half of the year, lifting the policy rate by 350bp to 4.75%.