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BCRP Analyst Views

PERU
  • JPMorgan have pencilled in a new 25bp hike, driving the policy rate to 8.0% this week. Assuming protests dissipate, JPM believe the central bank will find room to ease monetary conditions starting in June, though more gradually than they had thought previously.
    • JPM expect the policy rate to decline to 6.25% by year-end and to 5.25% by 2Q24.
  • Morgan Stanley economists are calling for a last rate hike at the February meeting to a terminal rate of 8.00%, when real rates ex ante (rates minus inflation expectations 12 months ahead) will be at their highest level going back to the start of the 2000s.
    • Policymakers should remain attentive to new information, including economic activity data and inflation expectations, in deciding future action. The ongoing social unrest has added more uncertainty regarding the near-term outlook for inflation.
  • Scotiabank economists note that although the low inflation in January suggests the possibility that the BCRP might consider the start of a pause in the rate hike cycle, they would not be surprised by an increase of 25bps, since it seems to them that the factors that explained the low month inflation seem temporary and because core inflation continues to rise.
  • Goldman Sachs expect the MPC to hike 25bp, to 8.0%, but see the decision as a close call between a 25bp hike and a hold-and-monitor decision coupled with hawkish signalling that the MPC would be open to resuming tightening if warranted. A 25bp hike may be followed by language and forward guidance suggesting the potential end of the tightening cycle.
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