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PERU: Goldman Sachs Expect 25bp Follow-Up Rate Cut This Week

PERU
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  • Goldman Sachs believes that recent data are broadly supportive of further normalisation of the policy stance through a moderate move. First, the inflation backdrop showed incremental progress, even relative to the benign dynamics in recent months, and inflation expectations continue to soften, approaching the 2.0% target. Also, the PEN strengthened by 1% against the USD since the last MPC meeting.
  • The headline inflation printed significantly below not only the Bloomberg consensus in September, but also the central bank’s forecast range of between -0.02% and +0.03%. The composition was favourable, with lower non-core prices and soft core pressures. On an annual basis, headline inflation reached its lowest level since Oct 2020, while core inflation fell to a three-year low 2.7% and services inflation returned to the target’s upper bound.
  • GS acknowledges that the latest MPC communique noted that the 25bp cut in September did not necessarily imply a cycle of consecutive moves, raising the bar for delivering a similar move in October. Still, GS views it as a soft constraint, one that could eventually be relaxed if the data evolved more favourably than expected by the central bank, as probably has been the case.
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  • Goldman Sachs believes that recent data are broadly supportive of further normalisation of the policy stance through a moderate move. First, the inflation backdrop showed incremental progress, even relative to the benign dynamics in recent months, and inflation expectations continue to soften, approaching the 2.0% target. Also, the PEN strengthened by 1% against the USD since the last MPC meeting.
  • The headline inflation printed significantly below not only the Bloomberg consensus in September, but also the central bank’s forecast range of between -0.02% and +0.03%. The composition was favourable, with lower non-core prices and soft core pressures. On an annual basis, headline inflation reached its lowest level since Oct 2020, while core inflation fell to a three-year low 2.7% and services inflation returned to the target’s upper bound.
  • GS acknowledges that the latest MPC communique noted that the 25bp cut in September did not necessarily imply a cycle of consecutive moves, raising the bar for delivering a similar move in October. Still, GS views it as a soft constraint, one that could eventually be relaxed if the data evolved more favourably than expected by the central bank, as probably has been the case.