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Differing Analyst Views on BCRP Decision Following Soft Inflation Data

PERU
  • A reminder that Wednesday’s release of April CPI showed a 0.05% M/m decline, which translated into an annual figure of 2.42% Y/y, comfortably below the expected 2.72%. With the data confirming annual inflation is now within the central bank’s target range (and trending towards target faster-than-expected), this potentially strengthens the case for another rate cut at the May 09 policy meeting.
  • Following the April deflation print JPMorgan have adjusted their December 2024 CPI 6bp lower, to 2.74%oya. On monetary policy, JPM expect the BCRP to stand pat next week. The BCRP has preferred to pause its easing cycle, taking advantage of the monthly decision frequency. JPM expect the central bank to resume easing in June, with another 25bp cut. In JPM’s central scenario, the policy rate converges to 5.25% by year-end, and terminal level sits at 4.25% by mid-2025.
  • BBVA noted the drop in inflation supports a 25bp cut by the BCRP in its upcoming meeting on 9 May. The continued loss of carry is likely to weigh on the PEN, although the BCRP continues to be involved as it looks to prevent any larger declines.
  • Goldman Sachs said the negative print is consistent with the temporary nature of the forces driving up the firm Feb-March inflation readings, which GS do not view as harbingers of new and persistent inflationary pressures at the present juncture. Aided by a still restrictive monetary policy stance, a negative output gap, and modest wage growth, GS expect headline and core inflation to fluctuate within the target band over the next months.
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