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Scotiabank on BCRP: Four Consecutive Hikes Doesn't Imply Tightening Cycle

PERU
  • In previous publications Scotiabank raised their benchmark rate forecast from 1.50% to 2.50% for end-2021, and therefore expect a new increase of 50 bps for the December meeting. Later, they further raised their forecast from 3.50% to 4.00% for 2022. This materializes the bullish bias that have already been observed in interest rates. Despite this adjustment, monetary policy would not lose its expansionary orientation, as interest rates would remain in negative territory in real terms.
  • Compared with other economies in the region, the reference rate in Peru is relatively low. The BCRP statement emphasizes it is best to keep the expansionary stance of monetary policy for a prolonged period through the gradual withdrawal of monetary stimulus.
  • The president of the BCRP, Julio Velarde, recently pointed out that the economy could grow 13.2% this year, a rate higher than the forecast of 11.9% that the central bank made in September. Velarde pointed out that the higher growth rate is not only a consequence of a rebound but also of the actions taken by policymakers.
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