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Analyst Views Following BanRep Minutes

COLOMBIA
  • **Goldman Sachs: The minutes highlighted that, at this juncture, the moderation of inflation expectations is the most important challenge for monetary policy, since its de-anchoring could lead to price and wage indexation at rates higher than the 3% inflation target.- Overall, adjusting by one-year-ahead inflation expectations, the ex-ante real monetary policy rate remains at historically low levels and, therefore, the central bank still maintains an accommodative monetary stance for the coming months.- In their assessment, the MPC will continue to normalize policy in the upcoming meetings, with the monetary policy rate crossing its neutral level to reach a slightly restrictive monetary stance (policy rate at 6.00% by the end of 2022).
  • **JPMorgan: This week, BanRep added considerable context to its decision to accelerate its tightening cycle with a 100bp hike at the Jan meeting.- The minutes concluding paragraph emphasizes that even after the 100bp hike, monetary policy remains stimulative “keeping in mind that in real terms the repo rate remains in negative territory, and below the neutral rate.” While the doves may think this stance is appropriate, the hawks are unlikely to feel comfortable considering the prevailing risks.- JPM now see another 100bp hike to 5% at the end-March meeting, followed by a downshifting to 75bp in April and a final 50bp in June, leaving the policy rate at 6.25%. Assuming inflation expectations could hover around 4% for some time, this would leave the policy rate in borderline tight territory.
  • A link to the minutes is here: https://www.banrep.gov.co/en/minutes-banco-republi...

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