BOC SAYS DOESN'T NEED TO ALTER PATH OF QT RIGHT NOW

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Falling Inflation Maintains Potential For BCRP Easing Pace Acceleration

PERU
  • **Itaú: Well behaved inflation (year-end estimate is 2.8%) and still soft non-primary activity support the central bank easing cycle. Itaú expect the BCRP to continue easing (with 25-bp rate cuts) in 1H24, from the current 6.50% down to 5% by July 2024, and staying at that level through year-end.
  • **JPMorgan are of the idea that the BCRP has room to step up the recalibration pace, particularly against the backdrop of subdued activity performance and inflation converging back within the target range. JPM expect another 25bp next week, though reiterate it would be optimal to accelerate the pace (a la Chile) to 50bp. The terminal rate for the cycle is projected at 4.0% by 4Q24.
  • **Scotiabank: While the January CPI result was slightly above Scotiabank’s forecast of 2.9%, it was below the median projection of 3.16%. Continued progress into the target range with anchored inflation expectations and El Niño price risks finally fading could prompt a larger cut by the BCRP soon—though perhaps not next Thursday.
  • **BBVA: Inflation will probably enter the target range in Q1 and the downward trend would continue during the next two on base effects, although the impact of global El Niño on the agricultural sector will provide some resistance. This environment gives the BCRP room to continue cutting, seeking to support the recovery of economic activity. The reduction would, however, be limited (25bp) taking into account the caution with which the BCRP has been acting.
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