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 - March 2023
Executive Summary
- According to the Bloomberg survey, the most probable outcome for this week’s BanRep meeting will be a 25bp hike, bringing the overnight rate to 13.00%.
- However, there are several analysts that believe the committee will vote for a bolder 50bp increase to 13.25%.
- Improvements for longer-term inflation expectations alongside central bank rhetoric regarding the risks to economic activity should prompt BanRep to opt for the less aggressive course of action at this juncture. Indeed, several analysts believe this could be the final action of the current tightening cycle.
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MNI BanRep Preview - March 2023.pdf
Co-Director Villamizar Emphasises Downside Risks To Economic Activity
While the inflation picture outlined below still denotes a hawkish stance from the Colombian central bank, there is an argument that the risks may be tilted to the downside at Thursday’s meeting. Focusing on an interview with central bank co-director Mauricio Villamizar, the policy-maker made it very clear that the risks of a sharp economic slowdown are now greater than the threat of faster inflation.
The former head of the central bank’s economics research department said that “we are now thinking that we’re at a sufficiently contractive monetary policy stance to reach the target in the medium term”. While Villamizar did add the caveat that “this doesn’t necessarily mean that we’re done hiking, or that we can’t rule out reacting to unexpected shocks”, his comments are interesting, especially in the context of the latest banking distress affecting global markets as well as the previous dissents at the previous meeting.
Core CPI Continues Ascent, Inflation Expectations Provide Cautious Optimism
Both annual headline and core readings have continued their upward trajectory, however February headline data did clock in below the median surveyed estimate. In February, headline CPI rose to 13.28% from 13.25% Y/y and annual core CPI registered at 10.86%, up from 10.43% a month ago.
On a brighter note, inflation expectations slightly improved at the margin. Despite the latest central bank survey of economists revising 2023 year-end inflation expectations to 9.00% from 8.83%, longer term measures were more steady and in some cases actually saw an improvement. 12-month inflation was cut to 7.21% from 7.28% and inflation expectations 24 months ahead feel to 4.01% from 4.10%. While caution must remain at the elevated levels of current CPI and core readings, the gradual re-anchoring of medium-term inflation expectations will be a very welcome sign for the central bank committee.
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.