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PERU: Itaú Expects At Least One Additional Rate Cut This Year

PERU
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  • Despite the surprise pause yesterday, Itaú notes that the BCRP has made substantial progress in bringing the policy rate closer to neutral over the course of the last year. They believe the central bank is likely to deliver at least one additional cut in 2024, in the context of well-behaved inflation and inflation expectations that are gradually converging to the target. Their year-end 4.75% policy rate call is biased to the upside.
  • The surprise takes place in the context of several out of consensus decisions by the BCRP throughout the easing cycle that has totalled 250bp. 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.
  • In Itaú's view, the unexpected pause might be explained by the recent bout of global financial volatility and higher oil prices, both mentioned in the statement. Following the decision, the one year real ex-ante rate remained at 2.82%, still above the 2.0% neutral real rate.
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  • Despite the surprise pause yesterday, Itaú notes that the BCRP has made substantial progress in bringing the policy rate closer to neutral over the course of the last year. They believe the central bank is likely to deliver at least one additional cut in 2024, in the context of well-behaved inflation and inflation expectations that are gradually converging to the target. Their year-end 4.75% policy rate call is biased to the upside.
  • The surprise takes place in the context of several out of consensus decisions by the BCRP throughout the easing cycle that has totalled 250bp. 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.
  • In Itaú's view, the unexpected pause might be explained by the recent bout of global financial volatility and higher oil prices, both mentioned in the statement. Following the decision, the one year real ex-ante rate remained at 2.82%, still above the 2.0% neutral real rate.