All surveyed estimates for the April 30 BanRep meeting point to the central bank cutting the overnight lending rate by 50bp to 11.75%.
A still robust US economy has seen Fed rate cut expectations pushed back further, while rising tensions in the middle east drove oil prices to their highest since last October earlier this month, adding to concerns about the inflation outlook. Against this backdrop, BanRep Governor Villar and some other board members have continued to adopt a reasonably cautious tone, with Villar still noting that inflation and inflation expectations remain well above target. Recently he said that the central bank is trying to cut rates at a pace that doesn’t surprise markets, which could potentially trigger capital outflows. However, he did also acknowledge that if the inflation outlook improves then the pace of rate cuts could accelerate.
In contrast, Finance Minister Bonilla has continued to strike a more dovish tone since the last meeting, saying in recent days that the central bank needs to cut the policy rate by 400bp this year (to 8.25%) with moves of 75-100bp per meeting. Bonilla, who voted for a 100bp cut at the previous meeting in March, has said that real rates remain too high and that he’d prefer to see a weaker peso, at around 4,000/USD.
