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Scotiabank: December Meeting Forecast Now Tilted Towards A 100bps Hike

COLOMBIA
  • Scotiabank noted that core inflation rose again, to 9.15% y/y from 8.32%, and ex-food and regulated goods inflation accelerated to 8.48% y/y from 7.49%. Core inflation is accelerating more than food inflation, reflecting the impact of FX depreciation as tradable inflation increased from 11.82% to 12.26%. However, it also reflects a robust performance of the domestic economy.
  • October’s CPI results continue to dash BanRep’s hope of an earlier peak in inflation. Upside risks to inflation in 2023 are increasing as the minimum wage negotiations (which start on Nov 30) will call for a higher adjustment. Inflation expectations deviating from target in the medium term would again place inflation worries among BanRep’s top concerns.
  • Scotiabank’s forecast for the December meeting is now tilted towards a 100bps hike, and a potential pause will likely be delayed until an inflation peak is confirmed which may not happen until Q1-2023.
  • It is also relevant to highlight that continued large hikes are needed to restore confidence in financial markets to prevent recent risk premium shocks embedded in Colombian assets to become entrenched.
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