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Scotiabank Following LatAm CB Decisions

  • Scotiabank believe Banxico may now hit a terminal rate of 12.00% (against their latest official forecast of 11%), with an unchanged overnight rate for the rest of the year. However, the prevailing uncertainty surrounding inflation remains high, and its behaviour in the following months will be decisive for the rate stance during the year.
  • Scotiabank think that the 7.75% level in Peru is likely to be the terminal rate. The decision to maintain the policy rate could have considered that the monetary policy position is already contractive enough to result in additional economic weakness. Indicators and expectations about the economy deteriorated in January, reflecting the impact of the social protests, and remain in a pessimistic territory.
    • In the scenario that the terminal rate has already been reached, Scotiabank’s attention will now turn to how long it may remain at this level with twelve-month inflation expectations remaining key.

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