More Tightening Amid Rising Inflation

June 2008 | Economic Analysis

Inflation continues to rise in Peru, which in our view will prompt the central bank into action over the coming months. We forecast two 25bps interest rate hikes this year, taking the policy rate to 6.00%, and see inflation at 4.6% y-o-y by end-2008. Despite some potential political resistance to further interest rate hikes, amid concerns about a stronger Peruvian sol, we believe that Peru's deteriorating inflationary environment will take priority with monetary policymakers.

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