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- JPMorgan discount more tightening ahead for the BCCh, with the board now projecting the policy rate to converge with its neutral level sooner than had been projected in September.
- They believe that the path ahead is very dependent on the fate of the fourth pension fund withdrawal in the Senate. Given the magnitude and extension of the fiscal transfers and liquidity support already deployed together with its impact on the labor market, JPM forecast inflation forecast close to the CBC target ceiling by end 2022 despite the anticipated deceleration in economic growth ahead. This would be aggravated if PFW4 is finally passed in Congress, implying faster tightening and higher terminal rates.
- JPM sees two central paths for the policy rate, conditional on PFW4. If approved, they pencil in the policy rate at 3.75% and 6.5% by December 2021 and 2022, respectively. If the pension fund withdrawal does not pass, they see a shallower path, with the policy rate at 3.25% and 5.0% by December 2021 and 2022, respectively.