Itaú BBA - COLOMBIA – Monetary Policy Meeting Minutes: Reinforcing stability

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COLOMBIA – Monetary Policy Meeting Minutes: Reinforcing stability

Dezembro 23, 2019

The board saw no reason to change the status quo

The minutes of the unanimous decision to hold rates at 4.25% in December reiterate the steady rates status quo. Activity is expected to remain dynamic next year, leading to the output gap narrowing, despite weak global growth. Meanwhile, inflation is under control and convergence to the target is expected during 2020. Overall, the notably short minutes retained a neutral tone, likely signaling there is no rush to move rates in the near term.

Inflation is viewed to trend down towards 3% during next year, as supply-side shocks dissipate. However, the minutes reaffirmed the view that this process would be slower than previously anticipated as a consequence of the tradable component evolvement. On this topic, General Manager Echavarria recently noted that the board sees limited upside risks coming from the recent social demonstrations and exchange rate depreciation effect.

Meanwhile, the output gap is seen narrowing during 2020. For this year, the technical staff expects growth of 3.2% (Itaú 3.3%, last year 2.6%), the highest since the fall of oil prices in 2014 and one of the best in Latin America. For 2020, activity would be led by a dynamic internal demand, partly offsetting the global and regional weaknesses. Despite the overall positive tone, the board remains concerned with weak labor market dynamics.

Regarding the wide current account deficit, the board highlighted its favorable financing. The minutes also noted the ample international liquidity, supporting global financing conditions.

We expect stable rates for the time being. By the time of the next monetary policy decision on January 31, we expect President Duque to have appointed the replacement for departing board member Ocampo.

Miguel Ricaurte
Carolina Monzón

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