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COLOMBIA: Itaú Expects Another 50bp BanRep Rate Cut This Month

COLOMBIA
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  • The smaller than expected current account deficit in the third quarter raises the odds that the full-year deficit will come in below Itaú’s 2.5% of GDP call. They note that a low deficit could moderate FX volatility to external shocks.
  • Amid a low current account deficit and falling inflation expectations, Itaú expects BanRep to continue to cut rates. However, tight global financial conditions and weak currency dynamics would prevent a majority of the Board from accelerating the rate cut pace. They expect another 50bp cut at the next monetary policy meeting on Dec 20 to 9.25%.
  • The low CAD in Q3 was mainly due to higher transfers and a smaller income deficit. Meanwhile, foreign direct investment continued to fall in Q3, but the overall financing of the deficit remains favourable. Net direct investment reached $2.4bn, resulting in $10.1bn for the rolling year, achieving a 138% coverage of the CAD.
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  • The smaller than expected current account deficit in the third quarter raises the odds that the full-year deficit will come in below Itaú’s 2.5% of GDP call. They note that a low deficit could moderate FX volatility to external shocks.
  • Amid a low current account deficit and falling inflation expectations, Itaú expects BanRep to continue to cut rates. However, tight global financial conditions and weak currency dynamics would prevent a majority of the Board from accelerating the rate cut pace. They expect another 50bp cut at the next monetary policy meeting on Dec 20 to 9.25%.
  • The low CAD in Q3 was mainly due to higher transfers and a smaller income deficit. Meanwhile, foreign direct investment continued to fall in Q3, but the overall financing of the deficit remains favourable. Net direct investment reached $2.4bn, resulting in $10.1bn for the rolling year, achieving a 138% coverage of the CAD.