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Itaú Revise Their Policy Rate And Inflation Estimates Up

COLOMBIA
  • Itaú note that Colombian inflation remains high, even without a significant effect from El Niño. Looking ahead, however, they expect base effects and favourable FX dynamics to help consolidate the disinflationary process.
  • With monetary policy remaining significantly contractionary, they expect BanRep to continue cutting interest rates, with another 50bp move at its next MPC meeting on April 30. They note that surprises in inflation dynamics and the evolution of inflation expectations will play a key role in determining the Board’s preference for the speed of the cycle.
  • However, fewer Fed rate cuts and a stronger global dollar have led them to revise their policy rate and inflation estimates up. They now expect BanRep to take the policy rate to 8.75% by year-end (up from 8.25% previously), while a slower inflation convergence path has led them to raise their 2025 year-end call by 75bp, to 6.0%, still 50bp above the neutral rate. Gradual disinflation, in a globally uncertain environment, does not seem conducive to fast easing in their view.
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