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PERU: Analyst Views On BCRP Decision

PERU
BulletPeruEM BulletEmerging Market News
  • BBVA says that the BCRP could take nominal policy rates down to 4.50% as that would take the real policy rate to around the estimated neutral rate. If inflation expectations continue to fall, this could open space for further cuts, depending on the magnitude of the drop. BBVA continues to flag their preference to add short USDPEN at or above 3.75.
  • Goldman Sachs interprets the communique as leaning slightly hawkish. First, the MPC said that the very low recent inflation readings were driven by temporary factors that will dissipate in the near-term. Second, the external backdrop became more exigent. Third, the MPC noted that economic activity indicators “show higher growth”. GS still believes the MPC will be patient in delivering a final 25bp rate cut to 4.5%, which would bring the policy rate to broad neutrality.
  • JP Morgan believes that the removal of the reference to the real interest rate approaching the neutral level indicates that the Board has shifted into a data-dependent regime, even though JPM assesses that monetary policy remains restrictive. JPM expects the BCRP to maintain the policy rate stable through Q2 and still sees room for a further 50bp of easing in H2. Fed easing seems a necessary condition for the BCRP to act, absent a more marked growth deceleration.
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  • BBVA says that the BCRP could take nominal policy rates down to 4.50% as that would take the real policy rate to around the estimated neutral rate. If inflation expectations continue to fall, this could open space for further cuts, depending on the magnitude of the drop. BBVA continues to flag their preference to add short USDPEN at or above 3.75.
  • Goldman Sachs interprets the communique as leaning slightly hawkish. First, the MPC said that the very low recent inflation readings were driven by temporary factors that will dissipate in the near-term. Second, the external backdrop became more exigent. Third, the MPC noted that economic activity indicators “show higher growth”. GS still believes the MPC will be patient in delivering a final 25bp rate cut to 4.5%, which would bring the policy rate to broad neutrality.
  • JP Morgan believes that the removal of the reference to the real interest rate approaching the neutral level indicates that the Board has shifted into a data-dependent regime, even though JPM assesses that monetary policy remains restrictive. JPM expects the BCRP to maintain the policy rate stable through Q2 and still sees room for a further 50bp of easing in H2. Fed easing seems a necessary condition for the BCRP to act, absent a more marked growth deceleration.