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Peru Policy Interest Rate 6.25% (consensus 6.0%) in Mar-24

• The Central Reserve Bank of Peru (BCRP) unexpectedly maintained its policy rate at 6.25%, against consensus expectations for a cut. It signalled a careful approach to managing inflationary pressures while initiating a complementary easing through reduced reserve requirements.
• This policy decision focuses on liquidity enhancement and economic stimulation without exacerbating inflationary risks, reflecting a nuanced balance in monetary policy strategy.
• Future adjustments to the BCRP's monetary stance will be closely tied to inflationary trends and economic indicators, with a steadfast commitment to guiding inflation back within the target range amid global uncertainties and domestic economic challenges.

ECB Calmly Awaits News

• The ECB unanimously maintained its policy rates and did not even discuss cuts despite this meeting being dovishly priced as starting a cutting cycle until recently.
• April is effectively ruled out, barring a crisis, with weakening wages needed to justify a June start. Resilient services inflation may mean wage costs are not benign enough.
• Although we believe the ECB expects to cut in June, we still expect resilience to delay that first move to September. A high neutral rate would also limit and slow cuts.

By Philip Rush

Canada Policy Interest Rate 5.0% (consensus 5.0%) in Mar-24

• The Bank of Canada's decision to hold the policy rate at 5% aligns with economic consensus. It was influenced by a global economic slowdown, easing inflationary pressures, and modest domestic growth below potential.
• Despite CPI inflation moderating to 2.9%, concerns over persistent core inflation and elevated shelter costs underscore the need for continued vigilance. The Bank anticipates inflation to stay close to 3% in the near term before gradually easing, with a full return to the 2% target expected by 2025.
• The Bank remains open to adjusting the policy rate if inflationary surprises occur. Its current focus is on monitoring wage growth, demand-supply balance, inflation expectations, and corporate pricing behavior. The decision process incorporates domestic conditions and global economic dynamics, ensuring readiness to act to maintain price stability.

New Zealand Policy Rate 5.5% (consensus 5.5%) in Feb-24

• The Reserve Bank of New Zealand's decision to maintain the OCR at 5.50% is predicated on a strategic imperative to curb inflationary pressures amid a complex interplay of domestic capacity easing and sustained global economic challenges.
• Global economic uncertainties, coupled with geopolitical and environmental risks, notably in shipping costs, present nuanced inflationary pressures that the MPC is poised to address through sustained restrictive monetary policy.
• The ongoing assessment of fiscal policy impacts, alongside the vigilance towards domestic and global economic developments, will critically inform the MPC's future policy decisions, underscoring a commitment to steering inflation towards the target range while fostering economic stability.