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Goldman Sachs on Peru Central Bank Decision/Policy

PERU
  • Unlike the last statement, there is no indication that the MPC expects a sizable inflation reading in April. Thus, the next CPI print will be an early indicator about the likelihood of the central bank’s projections, which anticipates a rapid decline of inflation after March.
  • In Goldman Sachs’ assessment, the MPC’s expectation of convergence to the demanding 2% ± 1.0% inflation target band by end-2023 is too sanguine given a still challenging macro-financial backdrop with inertial headline inflation, intense core inflation pressures (core inflation has not peaked yet), above-target inflation expectations, an unsettled political and social backdrop, food supply disruptions, and higher than anticipated energy prices (Peru is a net oil/energy importer).
  • Hence, GS anticipate that the MPC will maintain a restrictive monetary policy stance at least through the start of 2H2023, avoiding the temptation of premature easing of the policy stance.
  • As for upside risks to their policy rate forecast, their baseline scenario is that the MPC will not resume tightening at the next meeting, barring an incremental deterioration of the political and social backdrop that generates a negative shock to the capital account and the PEN, or a sizable reacceleration of inflation that could dislocate expectations further.
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