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Itaú Expect Cycle Has Concluded, Split Vote Possible

COLOMBIA
  • Itaú believe the BanRep board will deliberate between staying on hold or delivering another 25bp hike. Given the high level of the policy rate, the expectation that inflation will begin to fall, and market expectations for a hold in this meeting, Itaú expect the cycle to have concluded at 13%, but a split vote is possible.
  • In March, the central bank’s board unanimously voted to hike the policy rate by 25-bp, to 13%. The decision was below the 75-bp increase of the previous meeting and the first unanimous vote since October.
  • Both the press release communicating the decision and the press conference signaled that the board is open to further hikes if inflation surprises to the upside but also suggested that the cycle may have been concluded.
  • Headline inflation edged up marginally in March (+6bps to 13.34%), and food inflation continued to fall. The central bank’s survey showed the one-year inflation expectation dropping 21bps to 7% while the two-year outlook was broadly steady at 4%.
  • Even though core inflation expectations continue to rise, the surveyed median of analyst estimates narrowly expects BanRep to keep the policy rate unchanged at 13%.
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