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Scotiabank See Central Bank On Hold This Week

COLOMBIA
  • Slowing domestic consumption and falling inflation expectations would reflect the negative pressures on the economy from BanRep’s tightening marathon. Like the BCCh and the BCRP have experienced since their final hike, the end of rate rises still requires careful communications work and maintaining data-dependence to fend off cut expectations.
  • Recent economic activity indicators completed the picture to reinforce Scotiabank’s call for rate stability at this meeting. Private domestic consumption is slowing and, despite public spending increasing amid regional elections, the overall economy is showing a more moderate performance. Signals are showing that the backdrop of high inflation and high interest rates is impacting consumers in Colombia, which should motivate a switch to a “wait and see” stance from BanRep.
  • Scotiabank expect inflation to confirm the peak in April and despite the fact that the board won’t have these data for April’s meeting, this expectation will contribute to the discussion of rate stability.
  • In terms of local assets, the yield curve in Colombia pared gains, mainly driven by international developments in which markets are assessing when interest rates cuts could come. In the case of the FX, flows due to the seasonal payment of taxes by the corporate sector are diminishing, while on the international side, the USD is also testing key levels in a number of markets. Scotiabank’s fundamental model favours a 4,620 pesos level in the short term.
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