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PERU: Scotiabank Still Sees One Last BCRP Rate Cut, PEN Supported Near-Term

PERU
BulletPeruEM BulletEmerging Market News
  • Scotiabank still expects the BCRP to lower the reference rate one more time in the coming months, from 4.75% to 4.50%. Recent US tariff spats mean the BCRP is likely to share Scotia’s sense of caution and resist the temptation to go any further than that, despite lower-than-expected inflation data. Indeed, if anything, the possibility that the bank keeps its rate at 4.75% is no longer unconceivable.
  • USDPEN could also potentially be affected by US trade policy measures. And yet, outside of some intraday volatility, the PEN has performed with extraordinary stability recently. PEN stability is being underpinned by stronger-than-expected external balances, with preliminary information pointing to a record $73bn surplus last year.
  • Short-term, Scotia expects the PEN to strengthen until May or so, given the approaching March–April tax season, when mining companies typically sell USD and buy PEN to pay taxes. This factor should dissipate in H2, to be replaced by concerns regarding the 2026 political elections, with the PEN weakening once again. However, US trade policy has introduced more uncertainty regarding base metal prices, including copper, and these will be key for Peru.
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  • Scotiabank still expects the BCRP to lower the reference rate one more time in the coming months, from 4.75% to 4.50%. Recent US tariff spats mean the BCRP is likely to share Scotia’s sense of caution and resist the temptation to go any further than that, despite lower-than-expected inflation data. Indeed, if anything, the possibility that the bank keeps its rate at 4.75% is no longer unconceivable.
  • USDPEN could also potentially be affected by US trade policy measures. And yet, outside of some intraday volatility, the PEN has performed with extraordinary stability recently. PEN stability is being underpinned by stronger-than-expected external balances, with preliminary information pointing to a record $73bn surplus last year.
  • Short-term, Scotia expects the PEN to strengthen until May or so, given the approaching March–April tax season, when mining companies typically sell USD and buy PEN to pay taxes. This factor should dissipate in H2, to be replaced by concerns regarding the 2026 political elections, with the PEN weakening once again. However, US trade policy has introduced more uncertainty regarding base metal prices, including copper, and these will be key for Peru.