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BBVA On Peru Central Bank Decision

PERU
  • In general, the press release suggests that the Central Bank perceives a more complicated scenario for inflation in the coming months. In this regard, it should be noted that the BCRP once again changes the trajectory it foresees for inflation in the context of the conflict in Eastern Europe: now considering the deviation from the target range does not qualify as "temporary" and estimates that inflation will return to the target range between the second and third quarters of the next year (in the March release: first half of 2023, in February: fourth quarter of 2022).
  • BBVA Research have revised their inflation estimate for this year from 3.4% to 5.0% and for 2023 from 2.3% to 2.6% as a result of the impact of the conflict between Russia and Ukraine on the international price of oil and some grains and cereals.
  • In their current baseline scenario, they consider that these prices will remain at higher levels for longer, generating a prolonged impact on domestic inflation.
  • In addition, BBVA anticipate that expectations of price increases will be affected by this evolution, generating second-round effects on inflation.
  • Given the more complicated price scenario, in their baseline scenario BBVA believe that the BCRP will choose for continuing to adjust its monetary policy rate to contain an even greater de-anchoring of inflation expectations, raising the reference rate to 5.50% in the third quarter of this year.
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