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GS Do Not Anticipate BanRep To Explicitly Close Door To Further Hikes

COLOMBIA
  • Goldman Sachs expect the MPC to hike its policy rate by 25bp to 13.00%, with potential dissenting votes. They assign a 25% subjective probability to a bolder 50bp hike. Their view of a 25bp hike as the most likely scenario is grounded on the evolution of inflation expectations and the policy stance after the Jan meeting, when the MPC held that another hike was necessary to preserve the restrictive policy stance due to rising expectations.
  • The MPC may complement this move with guidance suggesting that with such a hike the policy stance becomes significantly restrictive to lay the groundwork for eventually stopping the tightening cycle, although we do not anticipate that the MPC will explicitly close the door to further hikes.
  • In their assessment, the case for a 50bp hike rests on a more conservative calibration of monetary policy to counter still challenging inflation pressures (e.g. inflation has not peaked yet) and heightened policy uncertainty given a heavy legislative agenda, including major reforms with macro and market impact (e.g. pension and labor reforms, national development plan). In doing so, the MPC would mitigate the risk of being perceived as dovish, which could potentially unsettle the COP.
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