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Scotiabank Adjust BanRep Forecast To 100BP Hike

COLOMBIA
  • Scotiabank’s initial call was for a 50bps hike including an intervention program, assuming that the concerns about economic growth remain. However, after the market’s reaction to the latest meeting, they think BanRep sees this dovish stance as a bad decision against on-edge markets. All in all, Scotia now expect a 100bp hike that leaves the policy rate at 11.00%, with a potential split dovish vote that sees one or more voting for a smaller increase.
  • Even a full-point hike may not be enough to meet financial markets’ expectations, but in our mind it would be notable as it would affirm the independence of the central bank, as a strong institution in Colombia.
  • This meeting will be also of particular importance as the staff is expected to present the monetary policy report to the Board, which includes a new macro scenario and balance of risks that are key to determining how close the bank is to the end of the hiking cycle.
  • The IBR market is pricing in a 125bps move and a terminal rate of 12.75% by March 2023. Scotiabank disagree with the market’s opinion as they expect BanRep to end its hiking cycle sooner, and at a lower level.
  • In the case of the Colombian peso, they see the possibility that BanRep announces a program to control the volatility of the exchange rate via options or NDFs. And they totally discard the possibility of an intervention through direct sales of USDs.
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