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Goldman Sachs on BanRep Minutes: 3.00% Policy Rate By End-2021

COLOMBIA
  • Overall, all MPC members noted that the high inflation prints and deteriorating inflation expectations, together with the narrowing output gap, all suggest that maintaining monetary stimulus at the current accommodative levels could compromise macroeconomic stability.
  • GS assess the MPC will continue to normalize policy in the coming meetings. Reducing the degree of monetary accommodation is warranted given the expected real economic activity growth, domestic demand dynamism, high inflation prints, deteriorating headline inflation expectations, and a large and widening current account deficit. In addition, hawkish regional and global monetary developments, high risk-premia given the challenging fiscal picture, sovereign rating downgrades, and an uncertain political and policy backdrop also justify the central bank's move towards monetary policy normalization. At this juncture, GS anticipate another 50bp increase at the MPC meeting in December, with the policy rate reaching 3.00% by the end of 2021.

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