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Scotiabank Expect 9.00% Terminal Rate In 2022 And 7.00% At End-2023

COLOMBIA
  • Inflation expectations deviated further from BanRep’s target range. July’s monthly inflation rate is, on average, expected to be 0.59% m/m and 9.99% y/y. Scotiabank Economics has an expectation close to consensus with 0.60% m/m and 10% y/y.
  • For July, we expect upside pressures from food inflation, the reversal effect of the VAT holiday, and the increase in gasoline prices. It is worth noting that, while annual inflation will increase from the previous 9.67% to 10%, by the end of 2022, consensus expects inflation to close at 9.38% well above the previous expectation of 8.87%. Inflation is also expected to stand at 5.25% at end-2023, above the central bank’s target range.
  • Ahead of July’s monetary policy meeting, 18 out of 25 analysts expect a 150 bps hike in the policy rate, while two expect a 125 bps increase and five expect a 125 bps move. Meanwhile, the monetary policy rate is expected to close 2022 at 9% by 12 analysts, with 12 analysts expecting a higher terminal rate, with the highest expectation at 11%.
  • Consensus expects the monetary policy to go back to around 7%– 7.50% in 2023. Scotiabank Economics expect a 9% terminal rate in 2022 and a rate of 7% at end-2023.
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