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Scotiabank Expect Strong April GDP Data, Following Surprise BCRP Pause

PERU
  • Scotiabank note that by maintaining the reference rate at 5.75%, the spread with the Fed rate remains at 25bp and the real interest rate increases from 3.1% to 3.2%, still far from the 2.0% considered a neutral level, reflecting a still contractionary stance. Despite this, Scotiabank believe that April economic activity could increase by more than 4% y/y, when it is released tomorrow (1600BST/1100ET).
  • Although headline inflation decreased to the mid-point of the target range in May, and prices that Scotiabank track suggest that there could be negative monthly inflation once again in June, the BCRP emphasised that core inflation increased from 3.0% in April to 3.1% in May, mainly due to a certain persistence associated with some service sectors.
  • Another significant factor influencing the BCRP’s decision was the outcome of its macroeconomic survey for May, which indicated a recovery in current economic conditions and mostly optimistic expectations for future indicators. Scotiabank also believe that the Fed’s forecasts would have influenced the BCRP’s decision, especially considering that at their June meeting, the Fed anticipated only one 25bp cut for 2024.
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