Free Trial

Scotiabank Expect 25bp BCRP Rate Cut, Before Easing Pace Slows

PERU
  • Scotiabank believe there’s no strong excuse to pause today and expect the BCRP to deliver another 25bp cut. Inflation in May was at the mid-point of the 1–3% target range and they believe that a slightly above-target core reading of 3.1% is not a reason to hold.
  • In their view, the BCRP is probably reaching the point where it has to decide at which meetings to pause and must consider whether it can build too much of a spread to Fed policy. With a cut to 5.50% it will match the upper bound of the Fed Funds target rate range. Scotiabank don’t think that is a concern yet, with the BCRP squarely focused on domestic inflation dynamics. Indeed, inflation expectations stuck in the mid-2s might be a greater concern.
  • After June, Scotiabank expect the pace of easing to slow to two cuts per quarter. For Q3, July is a candidate for a pause, given an expected slight rise of inflation in June. However, it is hard to know beforehand at which meeting BCRP will pause each quarter.
175 words

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
  • Scotiabank believe there’s no strong excuse to pause today and expect the BCRP to deliver another 25bp cut. Inflation in May was at the mid-point of the 1–3% target range and they believe that a slightly above-target core reading of 3.1% is not a reason to hold.
  • In their view, the BCRP is probably reaching the point where it has to decide at which meetings to pause and must consider whether it can build too much of a spread to Fed policy. With a cut to 5.50% it will match the upper bound of the Fed Funds target rate range. Scotiabank don’t think that is a concern yet, with the BCRP squarely focused on domestic inflation dynamics. Indeed, inflation expectations stuck in the mid-2s might be a greater concern.
  • After June, Scotiabank expect the pace of easing to slow to two cuts per quarter. For Q3, July is a candidate for a pause, given an expected slight rise of inflation in June. However, it is hard to know beforehand at which meeting BCRP will pause each quarter.