Peru cuts interest rates, but political turmoil set to rattle markets

Peru’s central bank cut its policy interest rate by 25bp last night, to 3.50%, and confirmed our view that rates are unlikely to fall further. What’s more, the surprise decision by Congress to dismiss the president’s cabinet is likely to trigger a sell-off in financial markets, which will keep further easing off the table. Elsewhere, the Chilean central bank left rates on hold but we think further easing is still likely.