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BBVA Expect Just 50BPs Of Cuts This Year

PERU
  • Although the possibility of eventually resuming rate hikes is still being left open, BBVA Research believe that this door is practically closed. Inflation is subsiding and BBVA believe that it will do so more noticeably in June (both total and underlying).
  • BBVA agree with the BCRP on inflation receding over the coming months amid the strength observed in the local currency, the weakness of domestic demand, and the same restrictive position of monetary policy, which will probably be further accentuated more passively to the extent that inflation expectations continue to decline.
  • In general, the vision of not giving signs to early monetary easing is close to what BBVA Research have been holding. BBVA believe that rate cuts will hardly be initiated in the very short term (it is reasonable to think that an eventual cut would be preceded by the withdrawal of the clarification regarding the end of the cycle of increases) and that the scenario for this to occur will be more favourable towards Q4.
  • This is when BBVA estimate not only that the Federal Reserve will have completed its own cycle, but the yoy inflation rate will be closer to the target range, showing a frank decrease, and with inflationary expectations probably not very far from 3%.
  • In their baseline scenario, the reference rate will be located at 7.25% at the end of 2023.
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