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JPMorgan Expect 50BP BCRP Hike, 7.0% Rate Until End Of Q1 2023

PERU
  • In terms of forecast revisions, following the August inflation report, Dec-2022 headline CPI forecast is tweaked higher, to 7.5%oya. The level is consistent with headline inflation decelerating to 0.33% per month in Sep-Dec 22, as compared to 0.75%m/m in Jan-Aug 2022.
    • For 2023, inflation is expected to decelerate, to 3.8%oya by December and 5.2% on average for the year.
  • In terms of monetary policy, despite the survey-based next-12 m inflation expectation metric started to decline, and core inflation decelerated, the fact that headline CPI momentum remained strong lead JPM to pencil in a new BCRP hike of 50bp this week (as compared to 25bp, previously).
  • If so, the policy rate level would reach 7.0%. Such level is likely to be maintained until the end of Q1’23, so to re-anchor inflation expectations within the IT range. JPM forecast the policy rate to converge to 4.5% by December 2023.
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