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PERU: Itaú Expects Another 25bp Cut, Later This Year

PERU
PeruEM BulletBulletGlobalEmerging Market NewsRegion
  • Itaú says that while the BCRP has made substantial progress on bringing the policy rate closer to neutral over the course of the last year, they believe the central bank is likely to deliver an additional reduction later this year to 5.0%, in the context of well-behaved inflation and inflation expectations that are gradually converging to the target. The imminent beginning of the Fed’s easing cycle should reduce concerns of exchange rate pressure, driven by the narrowing of the BCRP-Fed rate differential.
  • Itaú notes that the statement repeated the data dependent guidance, keeping the door open for further rate adjustments depending on inflation (emphasising the core index) and its determinants.
  • Following the decision, the real ex-ante rate fell to 2.81%, from 3.06%, still above the neutral rate of 2.0%. For context, the BCRP has brought the policy rate down from a peak of 7.75% in September 2023 to the current 5.25% and has complemented its monetary policy decisions with gradual reductions to the reserve requirement, from 6.75% in March to 5.75% now.
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  • Itaú says that while the BCRP has made substantial progress on bringing the policy rate closer to neutral over the course of the last year, they believe the central bank is likely to deliver an additional reduction later this year to 5.0%, in the context of well-behaved inflation and inflation expectations that are gradually converging to the target. The imminent beginning of the Fed’s easing cycle should reduce concerns of exchange rate pressure, driven by the narrowing of the BCRP-Fed rate differential.
  • Itaú notes that the statement repeated the data dependent guidance, keeping the door open for further rate adjustments depending on inflation (emphasising the core index) and its determinants.
  • Following the decision, the real ex-ante rate fell to 2.81%, from 3.06%, still above the neutral rate of 2.0%. For context, the BCRP has brought the policy rate down from a peak of 7.75% in September 2023 to the current 5.25% and has complemented its monetary policy decisions with gradual reductions to the reserve requirement, from 6.75% in March to 5.75% now.