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BCRP Review - Analyst Views

PERU
  • BBVA - They perceive that this BCRP statement incorporates a less dovish tone.
  • As well as the language tweaks, there is a greater emphasis on inflation expectations, highlighting that it is "especially attentive" to new information on inflation expectations, which have not been mentioned in other releases. Indeed, inflationary expectations have risen by 1.9% at the end of last year at 2.6% currently.
  • BCRP faces a dilemma between deterioration of activity indicators versus a rise in inflation expectations.
  • The current context of gradual recovery of the economy allows them to affirm that there are no demand pressures on prices that warrant an immediate adjustment of the reference rate. However, the rise in the exchange rate that has been observed since April could be transmitted in a more accentuated way on prices, so it should not be ruled out that the normalization of monetary conditions could be advanced with respect to what was foreseen in their current baseline scenario (Q2 2022).
  • Goldman Sachs - Forward Guidance Now More Hawkish
  • As such, a rate hike as soon as the August 12 meeting is in play (would be in keeping with removing part of the current high level of accommodation while still preserving a stimulative stance). Barring clearly negative real activity developments, another negative inflation surprise and/or further deterioration of inflation expectations would seal the deal for immediate policy rate normalization lift-off.
  • In fact, GS argue that given that the policy rate is currently at an historical low 0.25% and the ex-ante real policy rate has continued to decline, a 25bp rate hike at the next meeting would in fact still maintain a highly accommodative/expansionary monetary stance.
  • Beyond inflation, political and policy uncertainty and risk management considerations could also lead the central bank to go for earlier lift-off and possibly also more-frontloaded monetary policy normalization.
EM BulletCentral Bank of Peru - ReviewHomepageEM Central Bank ReviewLatAm Bank - ReviewEM Central Bank ReportsBulletEmerging Market NewsGoldman Sachs Market News
EM BulletCentral Bank of Peru - ReviewHomepageEM Central Bank ReviewLatAm Bank - ReviewEM Central Bank ReportsBulletEmerging Market NewsGoldman Sachs Market News

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