MNI BanRep Preview– Oct 2024: Cautious Easing Pace May Prevail
Executive Summary
- Analysts are divided between whether BanRep will opt to continue with its 50bp easing pace in October or deliver a larger 75bp cut of the overnight lending rate, which currently stands at 10.25%.
- Recent central bank rhetoric suggests that the cautious stance may prevail amid mounting fiscal concerns, and this is corroborated by the median surveyed estimate forecasting a 50bp move.
- However, last month’s close vote split and latest BanRep survey data suggest that the decision is by no means set in stone.
Click to view the full preview: MNI Colombia Central Bank Preview - October 2024.pdf
Concerns about the government’s fiscal position have risen further this month amid news that Congress is discussing a bill that risks a huge increase in government debt over the next decade. A technical study by the Finance Ministry has said that the proposal is not fiscally sustainable and would undermine public finances, while BanRep co-director Steiner warned recently of a fiscal disaster if the bill was implemented.
Steiner said that the country's fiscal outlook is a big concern, which makes it harder to ease monetary policy at a faster pace, noting that BanRep must avoid the rate cut reversal seen in Brazil. Concerns about the sustainability of the fiscal position, amongst ongoing disagreements over the 2025 budget, have weighed on the peso, with USDCOP rising above the 4300-resistance level recently, reaching its highest since October 2023.