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Scotiabank on BCRP: Further Policy Rate Increases Will Be Necessary

  • Over the past five months, the central bank raised its benchmark rate by 225 basis points to 2.50% and increased reserve requirements twice, indicating that it would continue to withdraw monetary stimulus.
  • Scotiabank believe that further increases in the policy rate will be necessary for inflationary expectations (3.7% at 12-months ahead according to the November survey) to return to the target range.
  • In presenting its Inflation Report last December, the BCRP adopted a moderate stance, which would suggest an increase of 25 bps at its meeting on Thursday, January 6; however, an increase of 50 bps is also on the radar and would not surprise them.

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