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Barclays On Andean Central Banks

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  • Barclays note that Chile’s and Colombia’s large current account deficits (c.10% and c.6% of GDP, respectively) leave them more vulnerable to a sudden stop in capital inflows. However, Barclays see risks relatively contained in Colombia, due to high FDI financing, while lower oil prices should help reduce pressure on Chile’s current account.
  • Colombia: Barclays have suggested that Banrep might prefer to be more cautious in the final stretch of its tightening cycle. Barclays have been expecting the bank to hike 50bp on March 30; depending on how conditions evolve following the global banking sector risks, it might prefer to do just 25bp in March and leave the door open to another 25bp in April.
  • Chile: In the case of the BCCh, Barclays do not expect the current tightening of global financial conditions and the possible Fed decision to not hike this week to affect monetary policy decisions in the immediate term. Barring a significant further worsening of conditions, they still expect the BCCh to hold at the April and May meetings. Their year-end policy rate forecast is 8.0%.
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  • Barclays note that Chile’s and Colombia’s large current account deficits (c.10% and c.6% of GDP, respectively) leave them more vulnerable to a sudden stop in capital inflows. However, Barclays see risks relatively contained in Colombia, due to high FDI financing, while lower oil prices should help reduce pressure on Chile’s current account.
  • Colombia: Barclays have suggested that Banrep might prefer to be more cautious in the final stretch of its tightening cycle. Barclays have been expecting the bank to hike 50bp on March 30; depending on how conditions evolve following the global banking sector risks, it might prefer to do just 25bp in March and leave the door open to another 25bp in April.
  • Chile: In the case of the BCCh, Barclays do not expect the current tightening of global financial conditions and the possible Fed decision to not hike this week to affect monetary policy decisions in the immediate term. Barring a significant further worsening of conditions, they still expect the BCCh to hold at the April and May meetings. Their year-end policy rate forecast is 8.0%.