Peru's 'Scorching' Recovery Has More Room, Morgan Stanley Says

June 7 (Bloomberg) -- Peru's "scorching" economic recovery has "more room to run in the coming months," Morgan Stanley said in a report in which it raised its growth forecast for this year and 2011.

Peru will grow 7 percent this year instead of 4.9 percent, Morgan Stanley economist Daniel Volberg wrote in a report today. In 2011, South America's sixth largest economy should see growth of 6.4 percent, instead of a previously estimated 5.5 percent, he wrote.

Prices for copper and commodities, which account for two- third of Peru's exports, remain "consistent with strong growth," Morgan Stanley said.

Peru's central bank is likely to raise interest rates this year to 3.25 percent, after raising its reference rate by a surprise 25 basis points last month to 1.5 percent. Part of the monetary tightening to cool the economy will be carried out by raising reserve requirements, Morgan Stanley said.

Previously Morgan Stanley saw the reference rate reaching 4.75 percent this year.