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Itaú Say Pressure Mounting To Cut Rates, Inflation Is Not Helping

COLOMBIA
  • In their latest Macro update for Colombia, Itaú have noted the gradual disinflation process is unfolding quite slowly, while risks associated with El Niño, adjustments to the minimum wage, and higher domestic fuel prices are likely to keep convergence of inflation a sedate process into next year.
  • In the near term, however, high real rates, falling medium-term inflation expectations, the significant COP appreciation, weaker domestic demand and a swift CAD correction consolidate the probability of a gradual easing cycle beginning in the fourth quarter this year.
  • Pressure to lower rates is also mounting following active calls by the finance minister (a voting member) and business guilds.
  • Itaú still see rate cuts starting in October but with a smaller 25bp adjustment (50bps previously) and to end the year at 12.5% (+25bps). They continue to see rates at 7.0% at the close of 2024 (above the nominal neutral rate of around 5%).
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