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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.
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