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JPMorgan Expect Monetary Easing To Begin In July

PERU
  • JPMorgan have noted that the pre-conditions required to start reducing the increasingly tight real monetary stance could be fulfilled by early 3Q23. Thus, in their baseline the BCRP would able to start trimming the nominal policy rate already in July, to avoid inflicting additional downside pressure on activity ahead.
  • As in prior months, pressures stemming from the social turmoil suffered in December and January persist on particular CPI components. Indeed, the breakdown shows May CPI was mostly impacted by ‘Food’ and ‘Restaurants & Hotels’ prices.
  • But more important right now is the material softening of underlying inflation. Indeed, ex.-food and energy CPI logged just 0.08%m/m, in this case below JPM’s forecast. When adjusting for seasonality, the monthly variation translates into +0.05%m/m, sa and the 3-month average tanked to 2.9% annualized, from 4.4% by April.
  • In all, JPMorgan maintain the call for further headline disinflation ahead, as the persistency of the 1Q23 shocks ebbs and headline gravitates to core levels. In terms of forecasts, they maintain Dec-23 headline CPI at 4.2%oya, but trim core by 20bp to 2.8%oya.
  • JPM expect the policy rate to converge to 6.0% by December 2023, and 4.0% by 2Q24.
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