Colombia : Monetary Policy Preview - The Case for Renewed Rate Cuts

Two factors prevented the hawks on the BanRep board from adopting a less restrictive monetary policy in their previous decision. The first was the deterioration on the fiscal front, which has not improved, and the second was the lack of progress on the disinflation front. Following the release of the June CPI, which was lower than expected, it will be difficult for the hawks to continue voting for a pause. Therefore, we forecast a 25 bps rate cut to 9.00% in July 31 meeting, although the doves on the board will of course continue to vote for rate cuts of 50 bps or more. We forecast that four or five board members will vote for a 25 bps cut and two or three will vote for a 50 bps cut. We continue to forecast the policy rate at 8.00% by the end of the year.