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Goldman Sachs & JPMorgan On BCRP Decision

PERU
  • *Goldman Sachs’ read of the communique is on net slightly more hawkish than expected, as they had entertained the possibility that the MPC would provide more neutral forward guidance, indirectly signaling that the easing cycle may start soon. Nevertheless, GS maintain their view that a policy pivot is on the way should incoming data further validate the central bank's view that inflation is firmly set on a decisive downwards trajectory.
    • All in all, at the August meeting GS expect either a cautious 25bp cut—especially if food supply disruptions continue to dissipate, inflation evolves favorably, and the FX backdrop remains supportive—or a more explicit cue of a probable cut for the September meeting.
  • JPMorgan: The Board continues to play with caution, and still finds suboptimal to even signal potential room to start easing the monetary policy in the near term. The fact that the next 12-m inflation expectations remain above target appears as the main deterrent factor for easing. But waiting for inflation expectations to converge to target before starting to normalize the nominal policy rate would drive the real ex-ante rate higher, as happened in June. Such real monetary policy stance is to prove more of a drag on banking credit, particularly to firms. That will likely prove an additional headwind to activity, whose level remains below its potential.
    • JPMorgan now expect a first cut in September (-25bp), and the policy rate converging to 6.25% by December.
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