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Further Analyst Comments On BCRP Rate Decision

PERU
  • Itaú note that the statement's neutral to dovish tone on inflation and activity seems to be supporting additional rate cuts. But they think that the main reason behind the pause in the easing cycle could be associated to FX depreciation given the narrowing of rate differentials and expectation of a delayed start of the Fed easing cycle. Itaú’s end of year policy rate forecast of 5.00% has an upward bias.
  • Pantheon still expect a further rate cut soon as underlying inflation remains under control, and the economic recovery is still fragile. They look for the BCRP to reduce rates to about 5.50% by June, and to around 4.00% by the end of the year, as inflation will continue to move towards the target and economic activity will remain subpar by previous standards.
  • Scotiabank note that the statement is not explicit in the reason to pause, although the increase in monthly inflation in February, stable inflation expectations and shift in Fed rate cut expectations may all have played a part. The cut in reserve requirements may reflect a desire for BCRP to make monetary conditions more flexible more quickly. Scotiabank note that favourable base effects for inflation in March and April may mean that the cycle of rate cuts resumes soon.
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