PERU: MNI BCRP Preview – Jul 2025: Cautious Hold Seen, Risk Of Cut

The New York Fed's Survey of Consumer Expectations (SCE) showed an improvement across the board in May, with respondents both less pessimistic on economic prospects and less concerned about future inflation compared with April. The prior months will of course have been impacted by the anticipation and announcement of April's "Liberation Day" tariffs, while May's respondents will have taken into account the US-China trade conflict climbdown on May 12 (NY Fed: "The survey is structured so that a roughly equal amount of data are collected every week of the month.")

• 1-Year median inflation expectations fell to 3.2% from 3.6% prior, the biggest drop since February 2023 to the lowest level since February of this year. 3Y median ticked 0.2pp lower to 3.00% (fully reversing what now appears to be a temporary tariff-led increase in April).
• The 5Y median fell to the lowest unrounded (2.61% from 2.74%) since January 2024, and is now nearly 0.4pp below the early-2024 peak.
• These levels are much closer to the longer-term averages, having not come close to pandemic reopening highs (at least in the cases of the 1Y and 3Y figures, the 5Y started in 2022).
• The NY Fed survey is seen as having a more robust methodology than other consumer surveys, and has certainly been less volatile during the current tariff episode. The UMichigan survey actually saw an uptick in the May 1Y reading in May (6.6% vs 6.5% April) albeit a slight decline in the 5-10Y (4.2% vs 4.4%); the Conference Board survey saw a 0.6pp pullback to 5.3% median 1Y expectations.
• The survey notes the declines "were broad-based across age, education, and income groups" and that "median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—declined at the one-year horizon and was unchanged at the three- and five-year horizons."

The Japanese government are reportedly mulling cash handouts as a relief measure, according to Mainichi. 

Not the first time we've seen this policy topic recently - this seems to be reviving an old policy idea that was dropped as recently as mid-April, at which the government dropped plans for tariff-tied cash handouts before the election in the upper house

Highlights from the article:

• "A proposal has emerged to provide tens of thousands of yen to every citizen with no income restrictions.
• "Liberal Democratic Party and Komeito are planning to accelerate adjustments to finalize the amount of the payment.
• "The Liberal Democratic Party and Komeito have also made it clear that they will not include a consumption tax cut, which the opposition parties are calling for
• "We can probably make the amount 20,000 yen or more."
• Full piece is here: https://mainichi.jp/articles/20250609/k00/00m/010/198000c

• +20,000 SFRN5 97.37 calls, 0.5 ref 95.86