The Central Bank of Colombia (BanRep) raised its key interest rate by 25bps to 13.25%. Analysts at TD Securities think this was the last hike in the cycle and they warn that after the recent Cabinet reshuffle form the President, the central bank has now additional reasons to be cautious in coming months.
“We think BanRep has hit terminal rate at 13.25%. As we expected, the central bank deployed another 25bp rate hike in a decision by majority. The wording of the forward guidance did not provide a hint on the central bank hitting terminal after today's meeting. Once more, it was stated that future decisions will depend on incoming data. However, based on our prospects for inflation, inflation expectations and economic activity in the run up to the next monetary policy decision (June 30), we think this was the last hike in the cycle.”
“BanRep has now additional reasons to be cautious in coming months. Up to April 25, we thought a data-dependent approach in the aftermath of April's monetary policy decision will focus on incoming inflation data, expectation surveys, and activity figures in the interim before the start of a cutting cycle. However, after the Cabinet reshuffle that took place on April 26, certain idiosyncratic factors have returned to the spotlight in the form of renewed fiscal and policy uncertainty.”
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