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Goldman Sachs:

  • Overall, robust external demand and firmer terms of trade, rising current and expected inflation, pervasive fiscal stimulus, and a still below-neutral nominal policy rate, support, in their assessment, a hawkish calibration of the monetary stance and a policy path that drives the reference rate above-neutral by early 2022.
  • At this juncture, GS expect the central bank to hike the policy rate to 3.75%-4.00% at its policy meeting next week with the outcome skewed towards the 4.00% range.


  • In terms of the monetary path ahead, the performance of ex-volatile core prices in November when adjusting for seasonality prompts JPM to revise the year-end policy rate to 3.75%, a level consistent with the upper range of the neutral policy rate as gauged by the CBC.
  • Facing persistent headline inflation in 1H22, they expect the central bank to tighten further, lifting the real policy rate into positive territory. Their baseline scenario assumes the policy rate converges to 5.5% by 3Q22, a rate, in principle, high enough to sustain the ex-ante real rate (deflating with 12-month-ahead inflation) at a level similar to what was offered during the previous Fed tightening cycle.
  • Admittedly, the fiscal policy to be implemented by the new administration could prove a game changer, though likely more of a factor for 2023. An aggressive fiscal expansion would be consistent with a higher real rate.