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PERU: Goldman Sachs Expects BCRP To Pause This Week

PERU
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  • Goldman Sachs expects the BCRP to keep the policy rate at 4.75% on Thursday. In their view, the volatile external backdrop, impacted by elevated trade policy uncertainty and the growing probability of a low-amplitude FOMC cutting cycle, along with a modest rate differential, a mildly restrictive policy stance, and limited economic slack, will prompt the MPC to bring a temporary pause to the cutting cycle.
    • GS says that the MPC is likely now in the fine-tuning stage of the cutting cycle, having left the guidance noncommittal and data-dependent last month. Still, the MPC signalled that the end of the cycle is close by, noting that the previously negative output gap likely closed and that the policy stance is approaching neutrality.
    • The balance of risks for inflation remains neutral, but the range and impact of potential shocks broadened. Heightened geopolitical tensions, driven by uncertainty about US trade policies, became a more preponderant risk factor.
    • Although the inflation backdrop remains benign, GS anticipates incremental headline and core progress during Feb-Mar, offering an additional reward to waiting.
    • Real activity grew by a robust 1.1% m/m sa in November, retracing some lost ground from Sep-Oct. With this print, the carryover for Q4 is tracking at 0.9% q/q sa, and for 2024 as a whole at 3.0%.
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  • Goldman Sachs expects the BCRP to keep the policy rate at 4.75% on Thursday. In their view, the volatile external backdrop, impacted by elevated trade policy uncertainty and the growing probability of a low-amplitude FOMC cutting cycle, along with a modest rate differential, a mildly restrictive policy stance, and limited economic slack, will prompt the MPC to bring a temporary pause to the cutting cycle.
    • GS says that the MPC is likely now in the fine-tuning stage of the cutting cycle, having left the guidance noncommittal and data-dependent last month. Still, the MPC signalled that the end of the cycle is close by, noting that the previously negative output gap likely closed and that the policy stance is approaching neutrality.
    • The balance of risks for inflation remains neutral, but the range and impact of potential shocks broadened. Heightened geopolitical tensions, driven by uncertainty about US trade policies, became a more preponderant risk factor.
    • Although the inflation backdrop remains benign, GS anticipates incremental headline and core progress during Feb-Mar, offering an additional reward to waiting.
    • Real activity grew by a robust 1.1% m/m sa in November, retracing some lost ground from Sep-Oct. With this print, the carryover for Q4 is tracking at 0.9% q/q sa, and for 2024 as a whole at 3.0%.