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JPMorgan on BCRP: Policy Rate Reaching 5% by 2Q22

  • Importantly, the Board noted that energy and food prices are proving more persistent than expected, which JPM read as a signal that additional tightening is required to re-anchor inflation expectations. In this regard, the next 12-m inflation expectations inched higher again by 5bp, to 3.73% from 3.68%, previously (J.P. Morgan 3.8%).
  • JPM expect headline inflation to average 6.1% oya in the first half of the year, decelerating to 4.4% in 2H22. They expect the BCRP to hike the policy rate again in March by 50bp, to 4%.
  • They thus maintain in their base case scenario, the policy rate reaching 5% by 2Q22. That would be consistent with ex-ante real rates about 80bp higher than the 2015-18 average level.

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