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Goldman Sachs Expect Another 50Bp Hike At Today's March Meeting

  • Goldman Sachs assess a small probability (15%) of a milder 25bp rate hike. In their view, despite the milder than expected Jan-Feb CPI prints and somewhat dovish BCRP forward guidance at the February meeting, the overall macro environment supports maintaining the pace of hikes.
  • Inflation is back above 6%, but core remains more contained. The Lima CPI increased 0.31% mom in February, broadly aligned with consensus expectations for a +0.31% mom variation. Annual inflation (Lima CPI) increased to 6.15% from 5.68% in January. Core excluding food and energy increased 0.21% mom, and as a result, the annual core measure increased to 3.26% from 3.08% in the prior month. In their assessment, inflation will rise further and remain elevated in the coming months, with the headline print likely to peak during 2Q2022.
  • At 3.0%, the first data point for end-2024 inflation expectations, within the central bank’s survey, is similarly tracking at the top-end of the central bank’s 2% ± 1.0% inflation target band.
  • The policy stance is still significantly accommodative (real ex-ante policy rate remains negative), short- and medium-term inflation expectations deteriorated further, moving further above target, and EM and core DM central banks are turning increasingly hawkish. All in all, GS expect the monetary policy rate to reach at least 4.75-5.25%.

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