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PERU: JP Morgan Still Sees Room For 50bp Of Further Easing In H2

PERU
BulletPeruEM BulletEmerging Market News
  • JP Morgan expects the BCRP to keep the policy rate stable through the second quarter of the year. However, they still see room for an additional 50bp in easing in the second half of the year, allowing the policy rate to converge to neutral.
  • They believe that Fed easing is a necessary condition for the BCRP to act, absent a more marked growth deceleration than they currently expect for H2.
  • The BCRP Board remains on data-dependency mode, even though JPM assesses that monetary policy is still in restrictive territory. JPM notes that the cyclical discussion reaffirmed that inflation is well behaved, with 12-month inflation expectations decreasing further, within the target inflation range.
  • The Board’s central scenario that annual inflation is poised to decelerate further in the very near term, aligns with JPM’s forecast. On the other hand, domestic demand has firmed up, and slack has vanished. In line with JPM’s baseline, however, the risks to external demand have increased.
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  • JP Morgan expects the BCRP to keep the policy rate stable through the second quarter of the year. However, they still see room for an additional 50bp in easing in the second half of the year, allowing the policy rate to converge to neutral.
  • They believe that Fed easing is a necessary condition for the BCRP to act, absent a more marked growth deceleration than they currently expect for H2.
  • The BCRP Board remains on data-dependency mode, even though JPM assesses that monetary policy is still in restrictive territory. JPM notes that the cyclical discussion reaffirmed that inflation is well behaved, with 12-month inflation expectations decreasing further, within the target inflation range.
  • The Board’s central scenario that annual inflation is poised to decelerate further in the very near term, aligns with JPM’s forecast. On the other hand, domestic demand has firmed up, and slack has vanished. In line with JPM’s baseline, however, the risks to external demand have increased.