Nudging up our forecast for Peruvian rates

The fact that the Central Reserve Bank of Peru (BCRP) raised interest rates by 25bps last night, rather than the 50bps that had seemed possible, suggests that policymakers will continue to tighten policy in small steps for now. Nevertheless, with growth set to remain very strong in the near-term and inflation likely to rise above target later this year, we are revising up our interest rate forecast. We now expect them to reach 5.5% by year-end (previously 4.5%).