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COLOMBIA: BanRep Minutes More Hawkish Than Expected

COLOMBIA
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  • Yesterday’s BanRep minutes were more hawkish than expected, with concerns about the fiscal outlook and the proposed de-centralisation bill dissuading a majority of the board from voting for a larger 75bp cut. To recap, the board voted 4-3 to maintain the easing pace at 50bp last week. The majority group was concerned that the proposed bill is putting pressure on the peso, adding to inflationary pressures. In contrast, the minority group focused on the larger-than-expected slowdown of inflation.
  • Goldman Sachs notes that besides the cautious messaging from the hawkish camp, the minutes signalled that at least for some of the dovish Directors, this meeting was the last opportunity to deliver a 75bp cut to boost activity. Contrary to the previous MPC minutes, the hawkish camp showed a unified message with no hints of heterogenous views. Given these signals, expectation of slow progress on core inflation, and the unlikely resolution of all the policy risk factors by December, GS maintains their base case of another 50bp cut next month.
  • Today, BanRep chief economist Hernando Vargas is due to present the central bank’s quarterly monetary policy report at 2000GMT(1500ET). The report itself was published earlier this week. No macro data are due today, with October CPI inflation data taking the focus next, on Friday.
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  • Yesterday’s BanRep minutes were more hawkish than expected, with concerns about the fiscal outlook and the proposed de-centralisation bill dissuading a majority of the board from voting for a larger 75bp cut. To recap, the board voted 4-3 to maintain the easing pace at 50bp last week. The majority group was concerned that the proposed bill is putting pressure on the peso, adding to inflationary pressures. In contrast, the minority group focused on the larger-than-expected slowdown of inflation.
  • Goldman Sachs notes that besides the cautious messaging from the hawkish camp, the minutes signalled that at least for some of the dovish Directors, this meeting was the last opportunity to deliver a 75bp cut to boost activity. Contrary to the previous MPC minutes, the hawkish camp showed a unified message with no hints of heterogenous views. Given these signals, expectation of slow progress on core inflation, and the unlikely resolution of all the policy risk factors by December, GS maintains their base case of another 50bp cut next month.
  • Today, BanRep chief economist Hernando Vargas is due to present the central bank’s quarterly monetary policy report at 2000GMT(1500ET). The report itself was published earlier this week. No macro data are due today, with October CPI inflation data taking the focus next, on Friday.