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BBVA Says Slight Drop In Core Inflation Insufficient For A Rate Cut Yet

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  • Given the local currency's continued volatility in recent weeks and, more importantly, the persistent resistance of core inflation to decline, BBVA believes there is a high probability that the BCRP will maintain the policy rate at 5.75% this week.
  • BBVA foresees that overall inflation will remain close to 2.0% in Q3, in an environment where inflation expectations are anchored, base effects remain relatively favourable and slack in the economy persists, despite improved economic activity compared to the beginning of the year. In Q4, base effects turn less supportive, resulting in inflation closing slightly above 2.5%.
  • The price environment, with inflation and inflation expectations within the target range, the still nascent recovery in activity and the contractionary monetary policy stance, suggest that additional policy rate cuts are likely in the coming months. BBVA anticipates that the policy rate will end the year around 5.0%.
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  • Given the local currency's continued volatility in recent weeks and, more importantly, the persistent resistance of core inflation to decline, BBVA believes there is a high probability that the BCRP will maintain the policy rate at 5.75% this week.
  • BBVA foresees that overall inflation will remain close to 2.0% in Q3, in an environment where inflation expectations are anchored, base effects remain relatively favourable and slack in the economy persists, despite improved economic activity compared to the beginning of the year. In Q4, base effects turn less supportive, resulting in inflation closing slightly above 2.5%.
  • The price environment, with inflation and inflation expectations within the target range, the still nascent recovery in activity and the contractionary monetary policy stance, suggest that additional policy rate cuts are likely in the coming months. BBVA anticipates that the policy rate will end the year around 5.0%.