PERU: Additional Analyst Views On BCRP Interest Rate Decision
Nov-14 15:37
- To recap, the BCRP left its reference rate at 4.25% last night, as expected. The policy statement was broadly unchanged, with the Board maintaining a data dependent stance and giving no guidance on future decisions. The door remains open to another cut ahead, although with the policy rate already very close to neutral and activity around potential, there is little urgency for the BCRP to act at this juncture.
- Itaú expects headline inflation to rise moderately in the coming months reaching 1.6% by year-end. The balance of risks remains tilted to the downside, particularly if favourable exchange rate dynamics and low oil prices persist. They believe the BCRP will cut the policy rate by 25bp in December, ending the cycle at 4%. However, with the output gap largely closed and the policy stance only slightly contractionary, the BCRP may delay the final cut into 2026.
- Meanwhile, JP Morgan’s baseline scenario calls for the BCRP to keep the policy rate steady for the foreseeable future. They note that market CPI expectations remain anchored, with one-year-ahead inflation forecasts steady at 2.2%, reinforcing the view that price dynamics are under control. In addition, a strengthening domestic backdrop also shaped the decision, with most indicators suggesting the economy is operating around potential and gaining modest momentum relative to October. JPM also notes the record high terms of trade impulse to domestic demand.
- Scotiabank says that price stability, strong domestic demand and robust economic activity expectations, despite the upcoming presidential elections, reinforce the perception that the BCRP will keep its policy rate unchanged for the time being. Notably, 12-month economic expectations have trended upward over the past five months, while 3-month expectations remain at their highest level in 6½ years. Scotia anticipates that the benchmark rate will remain unchanged through year-end and they see a 25bp cut at the beginning of next year.
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