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Accelerating CPI Prints Pressure BCRP, JPMorgan Update Rate Forecast

PERU
  • Large surprises yesterday in August CPI data may put further pressure on the central bank who recently hiked rates to 0.5% at the August 12 meeting:
    • Peru Lima Consumer Prices Rose 0.98% M/m in Aug.; Est. +0.21%
    • Peru Lima Consumer Prices Rose 4.95% Y/y in Aug.; Est. +4.01%
  • JPMorgan highlight that the consecutive above-expectation surprises suggest a regime change in terms of both the FX pass-through coefficient and also inflation expectations.
    • They see the August adjustment as insufficient and now believe the BCRP should step up the tightening pace to provide a clear signal preventing further de-anchoring of inflation expectations.
    • JPM now forecast a 50bp hike in the next monetary policy meeting, and the risk is for 75bp hike if inflation expectations move more than 25bp higher.

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