Colombia: Central Bank holds rates in April
Bank on hold: On 30 April, the Central Bank of Colombia (Banrep) decided to keep rates steady at 11.25% following rate hikes earlier in the year.
Wait-and-see approach prevails: The Central Bank’s hold partly reflected a desire to assess the 200 basis points of hikes made earlier this year before hiking further. Moreover, elevated uncertainty over the outlook for imported price pressures due to Middle East conflict was a further reason to wait and see. Finally, the Bank commented on its desire to be seen making any politically motivated moves in the context of elections due for end-May.
Banrep to hike further: The Central Bank did not provide specific forward guidance on future interest rate changes. That said, our panelists expect additional rate hikes ahead, with our Consensus for the policy rate to end this year close to a three-year high. The evolution of the U.S.-Iran conflict and its impact on imported inflation will be key to monitor.
Panelist insight: Commenting on the outlook, Goldman Sachs’ Santiago Tellez stated:
“All told, we still expect a 75bp rate hike in June and a final +25bp move in July for a terminal rate of 12.25%, but we are also open to back-to-back 50-50bp hikes. The hiking cycle delivered thus far, the restrictive policy stance, and incipient signs of a more moderate inclination to tighten further leave the risks to our forecast as balanced.”