Market split over Colombian central bank’s next interest rate decision

Market split over Colombian central bank’s next interest rate decision

By Nelson Bocanegra

BOGOTA (Reuters) – Analysts are divided between those who expect Colombia’s central bank to moderately raise its interest rate next week and others who expect an increase in line with previous moves amid fresh inflation growth, a Reuters poll revealed on Friday.

Eight out of 17 analysts polled expected the central bank to raise the benchmark interest rate by 100 basis points, taking it to 10%, while another eight expect a 150 basis point increase – as in previous meetings – which would take the rate to 10.50. %.

One analyst found himself in the middle, betting a 125 basis point increase, leaving the benchmark price at 10.25%.

A 100 basis point hike would reach its highest level since July 2008; A 150 basis point increase would put it at its highest level since July 2001, according to central bank figures.

“Inflation in July and August continued to surprise the upside by a wide margin (especially in August) and suggests that the bank’s recent forecast for the coming quarters should be revised upwards significantly,” said Andres Pardo, XP (NASDAQ :). Chief Macro Investment Strategist for Latin America.

Moves in Colombia’s interest rate align with monetary policy in the United States and Europe, amid dynamic domestic consumption and the depreciation of the Colombian peso, which fell by 10% in 2022, helping push 12-month inflation to 10.84% โ€‹โ€‹in August.

Inflation in Colombia is at its highest level since April 1999 and more than triple the central bank’s 3% target.

The Monetary Policy Authority has raised the benchmark interest rate by 725 basis points to 9% since September last year.

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The median forecast from the survey expects the overall rate to close at 11%, before the bank’s board of directors gradually reduce it to 8.25% in 2023.

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