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Analysts See Scope For 50bp Rate Cut In January

COLOMBIA
  • At Davos, President Petro spoke earlier this morning, noting that Colombia needs to turn the illegal economy into a legal one. He is also due to take part in a panel discussion this morning on cooperation between the North and South. Looking at today’s economic calendar, retail sales are expected to have fallen by 6.1% y/y (vs. -11% prior), supported by a slight recovery in car sales, while IP is expected to have declined by 2.0% y/y (vs. -2.2% prior) as manufacturing production remains weak (-5.5% exp.), all for November (1500GMT/1000ET).
    • Nov. Manufacturing Production YoY, est. -5.5%, prior -5.9%
    • Nov. Industrial Production YoY, est. -2.0%, prior -2.2%
    • Nov. Retail Sales YoY, est. -6.1%, prior -11.0%
  • The weakness in activity is also reflected in the latest economist survey published by BanRep this week, which shows 2024 real GDP growth expectations being trimmed to 1.5%, from 1.8% in October. This compares with growth of 1.0% expected in 2023.
  • Inflation expectations were also reduced further, with the 1-year ahead inflation outlook declining by 53bp to 5.17%, thus keeping the 1-year ahead real ex-ante rate well above BanRep’s 2.4% neutral estimate. In terms of monetary policy, most analysts expect a 50bp rate cut at the Jan 31st policy meeting, although a significant minority (44.7%) still look for another 25bp reduction. Year-end rate expectations remain unchanged at 8.25%. As a comparison, Itaú still expect a 25bp cut this month, but see scope for an acceleration in the pace of easing, with a year-end projection of 8.0%.
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