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Scotiabank Forecast 7.50% As Terminal Rate

PERU
  • Another 25bps hike by the BCRP is the consensus’ and Scotiabank’s call for its announcement on Wednesday—but this may be a secondary development to Castillo’s impeachment trial and vote also scheduled for Dec 7.
  • Scotiabank are changing their view on the BCRP terminal reference policy rate. They had expected the BCRP to raise the reference rate to 7.25% in November, as has occurred, and then leave the rate stable at this level into Q4 2023.
  • They now expect one more 25bps increase tonight, to 7.50% and believe this is what the BCRP signalled when it produced a policy statement in November that showed no change in wording compared to the previous decision.
  • When one looks at BCRP monetary policy, and then looks at political developments in Peru, it’s hard to believe that these correspond to the same country. Monetary policy is reasonable, predictable and sophisticated. Politics is anything but. There are plenty of political issues that are in flux currently and markets have reacted to this new wave of turbulence with surprising calm.
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