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BCRP Analyst Views – March 2023

PERU
  • Goldman Sachs: Although the MPC stated that the Feb “pause” did not necessarily imply the end of the cycle, the bar to resume tightening is high, barring an incremental deterioration of the political and social backdrop that generates a negative shock to the capital account and the PEN, and an unexpected reacceleration of inflation that could dislocate expectations further.
    • GS consider that the bar has not been reached given that: (1) the PEN appreciated ~2% against the USD since the Feb meeting; (2) social protests abated relative to Dec-22 and Jan-23; (3) inflation surprised to the downside for the second month in a row; (4) short-term inflation expectations shifted down; and (5) activity is softening.
  • Itaú expect the BCRP to keep its policy rate unchanged at 7.75%, but to keep the doors open for additional monetary adjustments depending on the inflation dynamics. While their GDP growth forecasts for 2023 and 2024 remain at 1.8% and 2.5%, respectively, Itaú note that the more benign external scenario (stronger China growth and higher copper prices) is an upside risk, while the impact of political turmoil on activity is still unclear.
  • Scotiabank: Inflation stabilized in February, marking two months below market expectations. The BCRP, like Scotiabank, projects a clear decline in inflation beginning in March, which will prompt the bank to likely continue with an unchanged reference rate at the 7.75% level established in February.
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