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 BanRep Preview - June 2022
Executive Summary
- The majority of analysts expect BanRep to increase the hiking pace at the June meeting, raising the overnight lending rate by 150bps to 7.50%.
- A further deterioration in both the domestic and global inflation outlook, a more hawkish Federal Reserve, the continued strong growth dynamics in Colombia and renewed pressure on the Peso all point towards the balance shifting within the committee, leaving a more aggressive hike as the most probable outcome.
Click to view the full preview: MNI Colombia Central Bank Preview - June 2022.pdf
Global inflation has increased further as a result of the persistent bottlenecks in production and the high levels of food and energy prices. In turn, global central banks continue to increase the pace of withdrawal of monetary stimulus. The Federal Reserve’s hawkish pivot to a more frontloaded tightening cycle continues to bolster the US Dollar, with the USD Index trading at multi-decade highs. Furthermore, the election of Gustavo Petro in the second-round Presidential election runoff, earlier this month, has exacerbated the weakness of the Colombian Peso. USDCOP has recently breached medium-term resistance above 4100 (shown below in figure 1), which is likely to place additional pressure on inflation and in turn the BanRep committee.
Economic activity data for April surprised to the upside, at 12% Y/y versus an estimate of 9.6% and a prior reading of 7.6%. The strong dynamism of growth, led by domestic demand, adds further weight to the call for the BanRep committee to increase the pace of tightening or risk falling further behind the curve. Indeed, BanRep Governor Villar, on June 14, said that economic activity has been stronger than expected with rising internal demand creating inflationary pressures. The governor conceded that the tightening process will probably lead the central bank to “a policy stance that is no longer just normalized but may begin to be a bit contractionary in order to counteract this situation of excess demand”.
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.