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Goldman Sachs Expecting a Hold With Hawkish Signalling

COLOMBIA
  • Goldman Sachs expect the MPC to keep its policy rate unchanged at 13.00% (in a potential split decision) coupled with hawkish signalling suggesting that rates will remain high for long and that eventually the MPC would be open to resuming tightening if warranted.
  • In their assessment, the MPC entered a data-dependent mode since the last meeting and the data evolved according to MPC expectations.
  • GS assign a 30% subjective probability to a 25bp hike that may be followed by language and forward guidance suggesting the end of the tightening cycle.
  • They view a hold-and-monitor decision as the most likely scenario for the following reasons: (1) the monetary policy stance on an ex-ante real basis is already tracking at historically-restrictive levels since the adoption of the inflation targeting regime; (2) one-year ahead inflation expectations continue to moderate after peaking in Jan, while end-2024 and two-year ahead inflation expectations have been stable since Feb; (3) food inflation decelerated further; (4) activity softened, which may comfort some hawkish directors with concerns about the dynamism of private consumption; (5) consumer and corporate credit growth keeps moderating in real and nominal terms; (6) the COP appreciated 2% against the USD since Mar; (7) import growth continued to soften; and (8) the PPI consolidated its downward trend.
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