Goldman Sachs Sees Peru Accelerating Pace of Interest Rate Hikes
(Bloomberg) -- Goldman Sachs Group Inc. expects Peru’s central bank to accelerate the pace of interest rate hikes, increasing borrowing costs to 1% next week amid deteriorating inflation expectations and political uncertainty.
The central bank led by Julio Velarde on Sept. 9 is most likely to boost the key rate by 50 basis points, double the pace of its August’s increase, Goldman’s chief Latin America economist Alberto Ramos wrote in a research note. He gives a 20% probability to a milder, 25 basis-point hike and a 15% probability to an increase bigger than 50 bps.
“Inflation expectations deteriorated significantly,” Ramos wrote in the Friday note. “Broad risk management considerations fully justify a faster and more front-loaded monetary policy normalization path.”
Peru lifted its benchmark rate last month by a quarter percentage point to 0.5%, the first increase in five years after inflation accelerated faster than expected and political turmoil with the arrival of the government of President Pedro Castillo sank the currency. Lima consumer prices rose almost 5% in August compared to a year ago, the fastest increase in more than 12 years.
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