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JPMorgan Now Looking For 25BP BanRep Hike Next Week

COLOMBIA
  • Despite the mild fine-tuning of March CPI up to 0.94%m/m, JPMorgan are also revising their monetary policy call and now see BanRep hiking the policy rate 25bp, instead of their prior 50bp call.
  • A forward-looking stance would put to the fore the significant adjustment of domestic demand under way, evidenced by the plunge in imports as well as the performance of banking credit, particularly credit to households in real terms (seasonally adjusted).
  • Furthermore, inflation expectations have not only plateaued, but started to decline. Finally, against the volatility triggered by banking and financial developments in core markets, JPM note the relatively good performance of the local currency compared to peers, despite the performance of oil prices.
  • In sum, the market is currently pricing more probability of a 25bp hike than of a 50bp one. Right now, with the market pricing in a probability of about 80% of a 25bp hike (and 20% of 50bp), any gain stemming from surprising the market, higher or lower, does not appear to be a dominant strategy.
  • In other words, the market seems inclined to give BanRep the option of hiking 25bp and staying in data-dependency mode ahead, an option that in JPM’s view is likely be exercised by the Board majority.
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