Peru rate hike may embolden Chile, Colombia to follow suit
By Mitra Taj
BUENOS AIRES, Sept 11 (Reuters) - The surprise decision by Peru's central bank this week to hike its benchmark interest rate for the first time since 2011 may embolden regional peers also torn between weak growth and currency-driven inflation to follow suit.
Central banks in Colombia and Chile have in recent meetings eyed raising rates to tame inflation fanned by their currencies' fall against the dollar. But they have held off due to lingering concerns that it would undermine their still-flagging economies.
"It will be a nudge for the rest of the banks to act," said 4Cast analyst Pedro Tuesta.
Chile's central bank and a member of Colombia's central bank board both declined to comment.
"Each one will be looking for the opportunity to make their respective modifications," as needed, said Adrian Armas, an economist with Peru's central bank.
Peru raised its benchmark rate by 25 basis points to 3.5 percent on Thursday. The timing of the move - a week before the U.S. Federal Reserve's policy-setting meeting - left its bank ahead of the curve.
Expectations for a U.S. rate hike have helped the dollar surge against emerging market currencies this past year. Peru's currency is down 12 percent in the past 12 months, while Chile and Colombia's currencies have slipped 17 and 56 percent respectively.
A U.S. rate hike could stoke further demand for greenbacks. Continuación...