Scotiabank Assign Significant Probability To An Unchanged Decision

As well as the BCCh decision later today, we have a monetary policy decision for Peru on Thursday. Some initial analyst views here:

**Scotiabank Say Lower Inflation Brings End Of Hiking Cycle Into Focus

• Scotiabank assign a significant probability that the reference rate will remain at 6.50% at the next BCRP meeting on September 08. A 25bps hike is less likely, but possible if the BCRP seeks to ensure convergence towards the target range.
• Going forward, Scotiabank expect the slowdown in inflation to continue, albeit at a gradual pace. Their inflation forecasts remain at 7.4% for 2022 and 4.0% for 2023.
• In the last twelve months, the BCRP raised its reference rate by 625 basis points to 6.50% and raised reserve requirements three times. The 12-month inflation expectations began to break in July, going from a record of 5.35% to 5.16% according to the July BCRP survey. Scotiabank see this trend as likely to have continued into August. The real interest rate (1.36%) is close to the neutral rate (1.50%), so Scotia believe that we are close to the end of the BCRP interest rate hike cycle.