Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
MNI Colombia Central Bank Preview - July 2023
Executive Summary:
- According to all surveyed analysts, BanRep is expected to hold the policy rate steady at 13.25%.
- June inflation data was a signal to the market that headline inflation is on a more optimistic trajectory and most analysts believe core readings will follow suit in July. The continued appreciation of the Colombian Peso is expected to support disinflationary dynamics going forward.
- Markets will focus on any potential guidance regarding future cuts, especially prevalent following Finance Minister Bonilla’s comments on the likelihood of September easing.
- However, given the very high levels of both headline and core CPI, the committee are unlikely to provide any additional information on a policy pivot at this juncture and will likely maintain its prior data dependence.
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MNI Colombia Central Bank Preview - July 2023.pdf
Core Inflation Yet To Show Evidence Of U-Turn
Within the latest set of central bank minutes, both headline and core inflation were described as being significantly distant from the established target of 3.0%. While these levels remain unacceptable to the committee, analysts remain more optimistic that the outlook is set to improve over the coming months. This is well highlighted by the latest central bank survey of economists, which showed year-end 2023 CPI expectations shift lower by 7bps to 8.95% and one year ahead expectations fall by a further 40bps to 6.02%. In similar vein, CPI ex-food in twelve months dipped to 6.04% from 6.46% in the prior survey.
Regarding the hard data annual headline inflation posted a surprise to the downside in June, falling to +12.13% (shown below), beneath the surveyed median estimate of 12.25% and down from 12.36% in May. There was further stubbornness for core components, although the metric did stabilise and rise just 3pp to 11.62%.
As a reminder, Governor Villar highlighted in a speech on June 14 that he expects core inflation to fall in the coming months. Given the improving headline data and the improvement for both short and medium-term expectations, the central bank will feel comfortable in standing pat at this juncture, however, will not be ready to declare any kind of victory and an associated policy pivot as of yet.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.