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COLOMBIA: CIBC Forecasting Year-End Rate of 8.75%

COLOMBIA
BulletEM BulletEmerging Market News
  • Following the lower-than-expected inflation data this weekend, CIBC are forecasting the Colombian central bank to cut the overnight rate by a further 200bps for the remainder of the year (75bps in September, 75bps in October, and 50bps in December).
  • They note that with 2-year inflation expectations already within Banrep’s 2%-4% target range, and the consolidation of the downward trend in headline and core inflation, this should allow the central bank to step up the easing pace and note their forecast into year-end is bolder than the ~180bps currently priced
  • With the market still assessing the magnitude of Banrep’s easing cycle amid the carry trade rout and ongoing political and fiscal risks, CIBC will keep their toes out of the water for now, but acknowledge that levels closers to 4300 should attract tactical USD/COP sellers.
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  • Following the lower-than-expected inflation data this weekend, CIBC are forecasting the Colombian central bank to cut the overnight rate by a further 200bps for the remainder of the year (75bps in September, 75bps in October, and 50bps in December).
  • They note that with 2-year inflation expectations already within Banrep’s 2%-4% target range, and the consolidation of the downward trend in headline and core inflation, this should allow the central bank to step up the easing pace and note their forecast into year-end is bolder than the ~180bps currently priced
  • With the market still assessing the magnitude of Banrep’s easing cycle amid the carry trade rout and ongoing political and fiscal risks, CIBC will keep their toes out of the water for now, but acknowledge that levels closers to 4300 should attract tactical USD/COP sellers.