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Goldman Sachs on BCRP: MPC Will Adopt A Data-Dependent Stance

PERU
  • In its statement, the MPC repeated that they are “continuing with the normalization of the monetary policy stance.” However, in a somewhat dovish forward guidance paragraph the MPC no longer stated that it deems “convenient to continue with the normalization of monetary policy in the coming months”.
  • GS read dropping this sentence as a signal that the MPC will adopt a data-dependent stance and does not necessarily assess the need of another 50bp hike at the next meeting in March.
  • Despite the backdrop of slower growth and January's inflation surprise to the downside, short- and medium-term inflation expectations continue to deteriorate and the policy stance will remain accommodative in coming months as the real ex-ante policy rate remains negative.
  • Furthermore, GS expect inflation to rise in the coming months and remain elevated. Consequently, their view is that further rate hikes are warranted (at least to a neutral policy stance) given the challenging inflation outlook and heightened policy and political uncertainty and risk.
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