Analyst Views Ahead Of Thursday's BCRP Decision

As well as Banxico, we have a central bank meeting in Peru on Thursday. Most surveyed analysts are expecting the BPRC to hike the reference rate by 50bps to 6.50%, however, one forecaster is predicting a bolder 75bp increase. Below are some analyst views/comments ahead of the decision:

• *JPMorgan: In terms of monetary policy, despite the increasing global recession probability, JPM expect the BCRP to continue tightening monetary conditions. They expect the BCRP to hike the policy rate again by 50bp next week and another 25bp in September, setting the terminal policy rate at 6.75%.
• *Barclays: Higher-than-expected inflation in July seems to have limited the space for a reduction of the tightening pace despite weak economic activity.
  • Barclays expect the BCRP to make another 50bp hike.
• *Scotiabank: Another 50bps hike to the reference rate is expected which would mean a cumulative rate increase of 625bps since the tightening cycle began one year ago.
  • Guidance will be key as some believe the hiking cycle could be winding up whereas there continue to be upside surprises to inflation at 8.7% y/y with core CPI still climbing at 5.4%.
• *Goldman Sachs: Inflation once more surprised to the upside and the overall macroeconomic outlook remains challenging. Inflation expectations have stabilized although they remain above the inflation target range, political uncertainty and risk remain significant, and more hawkish monetary policy from central banks in core economies will tighten global financial conditions.
  • Looking ahead, GS believe the MPC will continue to raise the monetary policy rate in 2022 (expect +50bp hike on Thursday) to reach a terminal level of 7.00% and expect monetary policy to remain moderately restrictive (slightly above neutral) over the relevant policy horizon.