Goldman Sachs And JPMorgan Expect 50BP Hike To Terminal Rate Of 7.0%

Goldman Sachs expect the MPC to deliver another 50bp hike, driving the policy rate to a terminal 7.00%.

• Given that the MPC judges that annual inflation is already on a downward path towards target and the level of the policy rate, GS expect the forward guidance to turn more dovish, signalling that Peru is moving closer to end-of-cycle fine calibration of monetary policy, and as such, do not altogether rule out a shift to a milder 25bp rate hiking pace already this week.
• Inflation surprised to the upside for the fourth month in a row, but it is showing early signs of moderation at the margin. Inflation expectations stabilized but remain above target and political uncertainty and risk remain high. Looking ahead, Goldman expect monetary policy to remain moderately restrictive (slightly above neutral) over the relevant policy horizon.

JPMorgan Also Call For +50BP Hike

• JPMorgan: In terms of forecast revisions, following the August inflation report, Dec-2022 headline CPI forecast is tweaked higher, to 7.5%oya. The level is consistent with headline inflation decelerating to 0.33% per month in Sep-Dec 22, as compared to 0.75%m/m in Jan-Aug 2022.
  • For 2023, inflation is expected to decelerate, to 3.8%oya by December and 5.2% on average for the year.
• In terms of monetary policy, despite the survey-based next-12 m inflation expectation metric started to decline, and core inflation decelerated, the fact that headline CPI momentum remained strong lead JPM to pencil in a new BCRP hike of 50bp this week (as compared to 25bp, previously).
• If so, the policy rate level would reach 7.0%. Such level is likely to be maintained until the end of Q1’23, so to re-anchor inflation expectations within the IT range. JPM forecast the policy rate to converge to 4.5% by December 2023.