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Analyst Forecasts Differ Over BanRep Easing Timeline

COLOMBIA
  • Goldman Sachs expect inflation to continue to gradually trend downwards in 2023-2024 on the back of favourable base effects, normalized food supply, and a highly restrictive monetary policy stance. Nevertheless, GS anticipate high prints through 1Q2024 on the back of the holiday season, prevalent backward-looking indexation mechanisms, policy decisions, and an anticipated large minimum wage expansion weighing on labor-intensive services sectors.
    • GS still believe that the very slow progress on the disinflation process—especially core services—sets a high hurdle for an imminent policy pivot. GS maintain the view that the MPC is more likely than not to initiate the normalization of the policy stance next year rather than at the Dec 19 meeting.
  • JPMorgan maintain as base case the Board inaugurating an easing cycle this month, with a 50bp policy rate cut. Despite the very high real ex-ante rate, sitting north of 7%, the still high services and core CPI levels suggest the Board should proceed with caution. For next year, the realignment of the real policy rate is expected to continue, driving the policy rate to 9.0% by Dec-24.
  • Scotiabank: November CPI has something for both sides of BanRep’s board. Headline inflation should close 2023 below 10%, but hawks will point to persistently sticky core inflation. Scotiabank economists continue to think that the recent economic activity deceleration plus the current account deficit coming in well below BanRep expectations will give enough arguments to start a very gradual easing cycle and cut the benchmark rate by 25bps at the December 19th meeting, but we know that it will be a close call.
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