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9 Apr 2015
Peruvian central bank to remain ‘on hold’ – Scotiabank
FXStreet (Edinburgh) - According to Eduardo Suarez, Senior Currency Strategist at Scotiabank, the BCRP could leave the benchmark rates unchanged in its monetary policy meeting.
Key Quotes
“As we argued last week, our base case is that the BCRP will leave the reference rate unchanged in today’s meeting, given concerns that a cut could drive PEN weakness, that would mean higher costs for dollarized borrowers”.
“This would likely erode the benefits resulting from easing rates. In addition, from a macro variable standpoint, we don’t think the arguments are there to justify additional easing at the current time”.
“Growth is materially below trend, but we believe “trend” is not necessarily potential, given the past few years were distorted by a large terms of trade shock”.
“Inflation is only 2bps away from the top of the BCRP’s target range, but it has been persistently testing the upper boundary of the target, and with the weakening trend in PEN, risks of FX‐inflation pass‐through must be monitored”.
“Monetary policy settings are already somewhat loose. Although consensus looks for unchanged rates, there are still 5 of the 19 economists surveyed by Bloomberg who look for a 25bps cut”.
Key Quotes
“As we argued last week, our base case is that the BCRP will leave the reference rate unchanged in today’s meeting, given concerns that a cut could drive PEN weakness, that would mean higher costs for dollarized borrowers”.
“This would likely erode the benefits resulting from easing rates. In addition, from a macro variable standpoint, we don’t think the arguments are there to justify additional easing at the current time”.
“Growth is materially below trend, but we believe “trend” is not necessarily potential, given the past few years were distorted by a large terms of trade shock”.
“Inflation is only 2bps away from the top of the BCRP’s target range, but it has been persistently testing the upper boundary of the target, and with the weakening trend in PEN, risks of FX‐inflation pass‐through must be monitored”.
“Monetary policy settings are already somewhat loose. Although consensus looks for unchanged rates, there are still 5 of the 19 economists surveyed by Bloomberg who look for a 25bps cut”.