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Analyst Views Following BanRep Decision

COLOMBIA
  • *Scotiabank: BanRep delivered a 100 bps rate hike with a strong majority, which points to a firm commitment to anchor inflation expectations. Moreover, as the staff projects inflation to again surpass the target range ceiling, Scotiabank expect another hawkish hike in March’s meeting.
  • The terminal rate is also likely higher than their current estimate of 5%, but they will have a better assessment of that after the Monetary Policy Report is released on Monday.
  • *JPMorgan: Current policy rate call has BanRep’s repo rate reaching 5.75% by July, but JPM will carefully read Monday’s monetary policy report and Tuesday’s publication of the minutes. In particular, Governor Villar—who JPM note was a board member the last time the bank hiked 100bp (twice) in 2003—remarked that the staff’s estimation of Colombia’s neutral rate has moved up. The new estimate will be disclosed next week; in the October inflation report the real neutral rate was 1.5%.
  • Finally, Governor Villar made clear that today’s 100bp hike should not lead to insinuation that this pace will be maintained. That will be a function of the board’s reading of data and circumstances at the time of the next meeting at the end of March. Nonetheless, risks to JPM’s own call still seem skewed to a higher terminal rate, reached more quickly.
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