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JPMorgan On Inflation and BanRep

  • Given the signalling of JPMorgan’s tracker, they are revising their November CPI food inflation forecast up from 0.7% to 2.25% m/m. Given the 15% weight of food in the CPI, the revision raises their headline CPI forecast by 30bp to 0.77% m/m from 0.47%.
    • Their forecast would be higher in November except they are looking for monthly deflation in energy prices on the back of a reduction in electricity tariffs.
  • JPM continue to expect a 100bp move from BanRep at the December 16 voting meeting, with a final 50bp move in January to take the policy rate to 12.5%. That said, absent stronger market pressure, the board may be inclined to do less since they believe they are already in restrictive territory according to the minutes of the October meeting. JPM will also of course watch for pending changes in the composition of the board following Carrasquilla’s appointment being annulled.

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