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MNI BCRP Preview – Oct 2024: Gradual Easing Cycle To Continue

Following the soft September CPI data, the BCRP is expected to deliver another 25bp cut to 5.0%.
LatAm Bank - PreviewCentral Bank of Peru - PreviewHomepageAnalysisEM Central Bank ReportsEM Central Bank PreviewStory

Executive Summary

  • Following the soft September CPI data, the BCRP is expected to deliver another 25bp cut to 5.0% this week.
  • Headline inflation fell to its lowest level since October 2020 last month, while core prices have shown no variation over the last two months, giving policymakers room to continue with their gradual easing cycle.
  • Most analysts are forecasting a 25bp cut on Thursday, although some see risks of a renewed pause amid signs of a recovery in activity.

Click to view the full preview: MNI BCRP Preview - Oct 2024.pdf

September CPI data came in much softer than expected, with consumer prices falling by 0.24% m/m last month, driven by a drop in food prices. As a result, annual CPI inflation declined to 1.78% y/y, bringing it below the mid-point of the central bank’s 1-3% target range for the first time since the end of 2020. Core inflation, which the BCRP has placed particular emphasis on in recent months, also fell to a three-year low, while one-year ahead inflation expectations continued to decline. Even if September inflation marks a low, the meaningful downside surprise to the central bank’s expectations last month looks to keep the door open to a continuation of the gradual easing cycle this week, amid a still restrictive monetary policy stance. 

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Executive Summary

  • Following the soft September CPI data, the BCRP is expected to deliver another 25bp cut to 5.0% this week.
  • Headline inflation fell to its lowest level since October 2020 last month, while core prices have shown no variation over the last two months, giving policymakers room to continue with their gradual easing cycle.
  • Most analysts are forecasting a 25bp cut on Thursday, although some see risks of a renewed pause amid signs of a recovery in activity.

Click to view the full preview: MNI BCRP Preview - Oct 2024.pdf

September CPI data came in much softer than expected, with consumer prices falling by 0.24% m/m last month, driven by a drop in food prices. As a result, annual CPI inflation declined to 1.78% y/y, bringing it below the mid-point of the central bank’s 1-3% target range for the first time since the end of 2020. Core inflation, which the BCRP has placed particular emphasis on in recent months, also fell to a three-year low, while one-year ahead inflation expectations continued to decline. Even if September inflation marks a low, the meaningful downside surprise to the central bank’s expectations last month looks to keep the door open to a continuation of the gradual easing cycle this week, amid a still restrictive monetary policy stance.