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Goldman Sachs Forecasting BCRP To Deliver 25bp Cut

PERU
  • Goldman Sachs believe that the restrictive policy stance, a stronger exchange rate, and the ongoing realignment of inflation expectations with the target endows the MPC with room to deliver a prudent 25bp cut.
  • Signals from the March QIR indicate that BCRP remains reasonably comfortable with the overall dynamics of the disinflation process. First, it marked down its 2024 CPI forecast by 10bp to 2.2%. Second, it maintained the balance of risks for inflation unchanged. Third, it reiterated its expectation about the transitory nature of the current food supply disruptions, which should continue to dissipate. Lastly, despite the hawkish hold from last meeting, the communique’s policy tone indicator filter remains consistent with an overall dovish signal/guidance.
  • The PEN appreciated by ≈1% against the USD since the last MPC meeting, retracing all its losses since the start of the year. In turn, end-2024 and one-year ahead expectations declined further within the target band, and continue to approach its mid-point.
  • GS view the central bank as likely to look through the firmer month-on-month inflation print in March, which was driven by the annual resetting of education fees and seasonal holiday patterns. Aided by a negative output gap, a tight policy stance and favourable base effects, they expect inflation to return to within the 2% ± 1.0% target band soon - potentially as early as this month.
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