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Scotiabank on BCRP Decision

PERU
  • Scotiabank have tweaked upward our forecast for the BCRP reference rate for 2022 from 3.50% to 4.0%. Their forecast for end-2021 remains at 2.50%, with a 50 bps increase in November, and another 50 bps increase in December.
  • With inflation at 5.8% and on its way to our forecast of 6.5% by year end, it is becoming more of an issue than growth.
  • Moreover, they expect inflation to surpass 7% in early 2022, which would add urgency to central bank action. This, and an environment in which emerging market central banks are increasing their reference rates at an accelerating pace, make Scotiabank more inclined to believe that the BCRP will also be more aggressive.
  • In this respect, it is noteworthy that the BCRP surprised us last week when it raised its reserve requirements on bank deposits for a second time in recent months.

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