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BCRP Set To Decide On Rates Following February Pause

PERU
  • Initial analyst notes on Peru central bank decision due Thursday:
  • Scotiabank said the BCRP surprised them and markets when it did not hike in early-February. It will be no surprise, however, when it once again keeps its rate steady at its policy meeting this week. In fact, Scotiabank do not expect a rate change until Q4-2023.
    • At the same time, the outlook for inflation is starting to become clearer. After hovering between 8.0% and 8.8% since mid-2022, Scotiabank are now more comfortable with their expectation that inflation will dip below the 8% level by April, and possibly as soon as March.
  • 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.
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