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JPMorgan: Policy Rate Stable Ahead At 13.25% Through 3Q23

COLOMBIA
  • JPMorgan have pencilled in the policy rate stable ahead at 13.25% through 3Q23. Assuming no regime change in terms of fiscal policy ahead, JPM now see space for nominal easing in the last quarter of the year (starting with a 75bp cut in October). Their baseline assumes the policy rate converging to 11.75% by Dec-23, and 7.25% by Dec-24.
  • Following the events of the week, BanRep decided to hike the policy rate by 25bp, to 13.25%. As discussed last Wednesday, the decision between 25bp and unchanged was a close call, and that was proved by the voting action. Also, as expected, the Board did not close the door to additional tightening in case inflation proves stubborn, and thus maintains its data dependency mode.
  • The statement does not bring much new information, except for higher annual growth (revised to 1.0%y/y from 0.8%) and the 2023 current account deficit to 4.1% of GDP. Both forecasts align with our JPM’s central scenario.
  • During the press conference, outgoing finance minister Ocampo reiterated his expectation for his successor Bonilla to comply with the fiscal rule, paramount to prevent a widening of risk premia that would compromise the financial stability. Regarding monetary policy, Bonilla has already noted it is time to stabilize the policy rate and to ease in the second half of the year, as monetary tightening has already dampened activity.
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