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Goldman Sachs and JPMorgan on BCRP Decision/Policy

PERU
  • Goldman Sachs: Inflation has continued to surprise to the upside and the outlook remains challenging. Furthermore, uncertainty and political risk remain significant, and more hawkish monetary policy from central banks in core economies will tighten global financial conditions, although inflation expectations have started to moderate.
    • Looking ahead, GS believe the MPC will continue to raise the monetary policy rate in 2022 and expect monetary policy to remain moderately restrictive (slightly above neutral) over the relevant policy horizon. They expect some signals from the MPC that the policy rate is approaching a fine-tuning stage of the current hiking cycle in upcoming meetings.
  • JPMorgan: The BCRP insisted in maintaining a stable tightening pace of 50bp per meeting, and JPM believe the central bank would likely find optimal to tighten monetary conditions further, aiming to consolidate a declining path in both realized and expected inflation.
    • JPMorgan, therefore, expect additional tightening but in a smaller dose, with another 25bp hike in September. That would be consistent with the terminal policy rate climbing to 6.75%, and is conditional on August monthly inflation moderation as well as further decline in the next 12-m inflation expectations.
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  • Goldman Sachs: Inflation has continued to surprise to the upside and the outlook remains challenging. Furthermore, uncertainty and political risk remain significant, and more hawkish monetary policy from central banks in core economies will tighten global financial conditions, although inflation expectations have started to moderate.
    • Looking ahead, GS believe the MPC will continue to raise the monetary policy rate in 2022 and expect monetary policy to remain moderately restrictive (slightly above neutral) over the relevant policy horizon. They expect some signals from the MPC that the policy rate is approaching a fine-tuning stage of the current hiking cycle in upcoming meetings.
  • JPMorgan: The BCRP insisted in maintaining a stable tightening pace of 50bp per meeting, and JPM believe the central bank would likely find optimal to tighten monetary conditions further, aiming to consolidate a declining path in both realized and expected inflation.
    • JPMorgan, therefore, expect additional tightening but in a smaller dose, with another 25bp hike in September. That would be consistent with the terminal policy rate climbing to 6.75%, and is conditional on August monthly inflation moderation as well as further decline in the next 12-m inflation expectations.