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MNI Colombia Central Bank Preview – July 2022: Maintaining 150BP Hiking Pace

The majority of surveyed analysts expect BanRep to hike the overnight lending rate by 150bps from 7.50% to 9.00% on Friday.

Executive Summary

  • The majority of surveyed analysts expect BanRep to hike the overnight lending rate by 150bps from 7.50% to 9.00% on Friday.
  • Annual headline inflation is approaching 10% and the latest central bank surveys point to a continued deterioration of medium-term expectations.
  • Inflation dynamics, combined with a resilient growth profile and substantial weakening of the local currency indicate the significant likelihood that BanRep maintain its aggressive pace of tightening.

Click here for the full preview: MNI BanRep Preview - July 2022.pdf

Minutes Confirm Need for Further Aggressive Action

The BanRep board used the June policy meeting minutes to affirm the justification for the bolder unanimous action. “The Board stressed that inflation expectations from various surveys have risen significantly, thus increasing the risk of de-anchoring them.” With this said, it is important to note that inflation expectations have continued their upward trajectory. In the latest BanRep survey of economists, year-end CPI is now predicted at 9.22% versus 8.62% from the prior survey. Additionally, medium-term expectations showed a similar deterioration, with the 2023 year-end median estimate rising from 5.2% from 4.66%.

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Executive Summary

  • The majority of surveyed analysts expect BanRep to hike the overnight lending rate by 150bps from 7.50% to 9.00% on Friday.
  • Annual headline inflation is approaching 10% and the latest central bank surveys point to a continued deterioration of medium-term expectations.
  • Inflation dynamics, combined with a resilient growth profile and substantial weakening of the local currency indicate the significant likelihood that BanRep maintain its aggressive pace of tightening.

Click here for the full preview: MNI BanRep Preview - July 2022.pdf

Minutes Confirm Need for Further Aggressive Action

The BanRep board used the June policy meeting minutes to affirm the justification for the bolder unanimous action. “The Board stressed that inflation expectations from various surveys have risen significantly, thus increasing the risk of de-anchoring them.” With this said, it is important to note that inflation expectations have continued their upward trajectory. In the latest BanRep survey of economists, year-end CPI is now predicted at 9.22% versus 8.62% from the prior survey. Additionally, medium-term expectations showed a similar deterioration, with the 2023 year-end median estimate rising from 5.2% from 4.66%.

Keep reading...Show less