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Scotiabank Expects 25bp Cut In August, With Year-End Rate At 5.0%

PERU
  • Scotiabank’s base case sees three cuts of 25bp over the next five meetings until the end of the year. That means that the reference rate would be 5% at the end of 2024. The BCRP survey for June showed that the market increased its key rate expectation for the end of the year from 4.75% to 5.00%. Scotiabank expects that the BCRP will cut its policy rate at its meeting on August 8th by 25bp, to 5.50%.
  • The BCRP board highlighted that it maintained the rate for two main reasons, in their view. Firstly, because core inflation remained above the target range at 3.1% in June, once again showing persistence associated with some service sectors. Secondly, the macroeconomic expectations survey for June indicated favourable current economic conditions and optimistic expectations for most indicators, for the second consecutive month.
  • Scotiabank notes that by maintaining the reference rate at 5.75%, the spread with the Fed rate remains at 25bp and the real interest rate stays at 3.2%, far from the 2.0% neutral level, reflecting a still contractionary stance.

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