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BanRep July 2022 - Analyst Views Continued

COLOMBIA
  • JPMorgan: Both Restrepo and Villar reaffirmed that the board has not decided on a terminal rate, and that much can change between now and the next voting meeting at the end of September.
  • JPM’s current call is for BanRep to deliver a final 50bp hike at the September meeting to leave the policy rate at 9.5% but they will be attentive to the tone of the minutes and the staff’s quarterly monetary policy report this upcoming week to fine-tune this call.
  • Their current forecast has BanRep maintaining this rate until March 2023, at which point slower growth and JPM’s forecast for headline inflation to begin to descend should allow a gradual easing process.
    • They see the end-2023 policy rate at 7.75%, down from the flat 8.5% that prevailed throughout in their old forecast. JPM reiterate the view that if market pressure reasserts itself, either due to international volatility or a more adverse turn in the direction of domestic policy, then BanRep could be forced to reach a higher rate and stay there for longer.
  • Scotiabank: The MoF, Jose Manuel Restrepo, highlighted that there was unanimity on the need to continue raising the rate as economic activity remains strong. He highlighted that consumer credit is growing above 20%. Additionally, he said that the member who voted for a 100 bps hike cited signals of weakening in the credit market and business sentiment that would harm the economic activity.
    • It is worth noting that in July’s meeting the economic staff revealed a fresh macroeconomic forecast to the Board, with an upside revision on the GDP growth. Further details will be provided on Monday (after 5 pm local time). Scotiabank will revise their expected terminal rate, but for now anticipate an additional rate hike in September.
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