Colombia | The path to monetary policy normalization
The Colombian economy is finally showing hints of an inflation build-up, with monthly CPI rising above its seasonal average in both April and May. Headline inflation is now at 3.3% y/y, and base effects alone will most likely bring it close to BanRep’s target of 4% by year-end.
What you will learn:
- As signs emerge that inflationary pressures are finally building in Colombia, we expect BanRep to use its June policy meeting to lay out its plan for withdrawing monetary stimulus, starting in July with a 25bp hike.
- But even if BanRep hikes rate four times before year-end, it will still be far from the end of its normalization cycle. Based on our modelling, the central bank will retract stimulus gradually, reaching a 4.75% terminal rate only in Q4 2023.
- This gradualism comes with risks. Asset price volatility ahead of the May 2022 general election could contaminate inflation expectations. Meanwhile, Colombia’s fragile external position makes it vulnerable to capital outflows in a world of faster tapering in the US and potential further rating downgrades.
Tags:
Related Services
Post
Relative return index signals improving CRE attractiveness
Our latest global relative return index (RRI) signals that risk-adjusted investment opportunities in commercial real estate (CRE) should start to emerge this year before becoming more widespread in 2025. At this point, our baseline expected returns move higher than required returns, pushing the global all-property index above the 50 mark.
Find Out More
Post
South Africa: Elections 2024 | ‘ANC & friends’ election scenario
This Research Briefing sets out the first of four scenarios for South Africa's general election on May 29. In this scenario, the ANC wins over 46% of the vote share at the national level, and forms a government by working with small, constituency-based parties.
Find Out More