- Goldman Sachs expect the MPC to hike 25bp, to 8.0%, but see the decision as a close call between a 25bp hike and a hold-and-monitor decision coupled with hawkish signaling that the MPC would be open to resuming tightening if warranted. A 25bp hike may be followed by language and forward guidance suggesting the potential end of the tightening cycle.
- GS list six factors which warrant the need for an additional 25bp hike: (1) inflation reached a six-month high in Jan and may be further strained by disruptions to food supply given ongoing social unrest; (2) core ex-food & energy inflation reached a new cyclical high and continues to track above target; (3) short-term inflation expectations deteriorated sharply; (4) Moody’s cut the sovereign rating outlook to Negative from Stable on the back of growing political and social tension, potentially exacerbating FX pressures; (5) the domestic political and policy environment remains highly unsettled with a growing possibility of noisy early elections; and (6) somewhat hawkish statements by Governor Velarde arguing that recurring social protests may weigh on inflation (he also mentioned their potential impact on growth).
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PERU: Goldman Sachs See Close Call Decision Thursday
Last updated at:Feb-06 19:25By: Jack Lewis
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- Goldman Sachs expect the MPC to hike 25bp, to 8.0%, but see the decision as a close call between a 25bp hike and a hold-and-monitor decision coupled with hawkish signaling that the MPC would be open to resuming tightening if warranted. A 25bp hike may be followed by language and forward guidance suggesting the potential end of the tightening cycle.
- GS list six factors which warrant the need for an additional 25bp hike: (1) inflation reached a six-month high in Jan and may be further strained by disruptions to food supply given ongoing social unrest; (2) core ex-food & energy inflation reached a new cyclical high and continues to track above target; (3) short-term inflation expectations deteriorated sharply; (4) Moody’s cut the sovereign rating outlook to Negative from Stable on the back of growing political and social tension, potentially exacerbating FX pressures; (5) the domestic political and policy environment remains highly unsettled with a growing possibility of noisy early elections; and (6) somewhat hawkish statements by Governor Velarde arguing that recurring social protests may weigh on inflation (he also mentioned their potential impact on growth).
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