- Colombia: BanRep Survey—Economist consensus lowers inflation expectations, and foresees a larger rate cut in September
It’s a very quiet Monday devoid of major data or news while we wait for a busier second half of the week punctuated with global PMIs and the Jackson Hole symposium. Markets are trading with a neutral mood as Asia FX post strong gains (JPY up 1%, CNH up 0.3%) while other majors grind marginally higher—except for the MXN, losing 0.2%. US equity futures are only a touch lower, as European indices trade mixed and so do commodities with oil about 1% lower (though with no real movement in ceasefire talks) and iron ore surging ~3% despite a weak demand backdrop and gluts while copper follows with a decent 1% rise.
After opening weaker in Asia by a couple of bps in the front-end, USTs have been steadily bid to show a small bull flattening, while EGBs and gilts are more evenly bid 2/3bps across the curve to align with post-London gains in rates on Friday that unwound the selloff on the US U Michigan beat. The Fed’s Daly, in an FT interview on Sunday, said that the economy is “not in an urgent place”, pouring more cold water on thinning expectations of a 50bps cut in September; her comments broadly point to two or three 25bps cuts this year.
The Latam day ahead has only the release of Chilean Q2 GDP at 8.30ET on tap with the BCCh’s September 3 meeting rising on the horizon. The median economist is expecting a 0.6% q/q contraction in output, but with the decline following a strong 1.9% q/q rise in Q1 that owed greatly to a 6.9% increase in mining output. Monthly economic activity figures show a ~1% drop in mining but also weakness in manufacturing, commercial activity, and services. Overall, recent data and the BCCh’s July meeting minutes point to the bank resuming rate cuts at its September decision after a somewhat unexpected rate hold in July; figures in coming months will determine which meetings the BCCh decides to skip.
—Juan Manuel Herrera
COLOMBIA: BANREP SURVEY—ECONOMIST CONSENSUS LOWERS INFLATION EXPECTATIONS AND FORESEES A LARGER RATE CUT IN SEPTEMBER
The central bank (BanRep) released results to its survey of economists for August (chart 1). Inflation expectations decreased, which is good news for the central bank and vanishes fears about lack of credibility on the monetary policy front. For December 2024 and December 2025, expectations stand at 5.70% and 3.87%, respectively. The one-year inflation expectation is at 4.16%, down 13bps, while the two-year horizon (August 2026) decreased by 8bps to 3.52%. As for short-term inflation expectations for August, the expectation is at 0.23% m/m, which could lead to inflation falling to 6.36% from the current 6.86%. Scotiabank Colpatria’s projection is 0.24% m/m and 6.37% y/y. Inflation in August would continue to be pressured by the indexation of rental rates, while the other components would have moderate pressure on prices. Tolls increased at the beginning of August, however, the impact of the adjustment would not imply greater pressures.
Regarding the monetary policy rate, the market consensus projects a cut of 75bps at the meeting on September 30th, which is the same expectation that Scotiabank Colpatria has. For the end of the year, the consensus expectation of economists remained at 8.50%, the same expectation as Scotiabank Colpatria. For 2025, the consensus of analysts expects the monetary policy rate to fall to 6%, while Scotiabank Colpatria maintains the expectation that it will reach 5.5%.
BanRep has maintained its cautious stance in the easing cycle, however, the most recent inflation data reinforces our expectation that the pace of cuts will accelerate in September. However, we still need to observe inflation in August, which will be key to the materialization of our base scenario. Additionally, BanRep will have the advantage of deciding after the Federal Reserve. If the Fed cuts interest rates, BanRep could have greater confidence to accelerate the pace of cuts.
Key points from the survey :
- Short-term inflation expectations. For August, the consensus is 0.23% m/m, which implies an annual inflation rate of 6.36% y/y (compared to 6.86% in July). The maximum expectation is 0.44% and the minimum is 0.10%. Scotiabank Economics’ projection is 0.24% m/m and 6.37% y/y. Core inflation excluding food projected by analysts is 0.24% m/m, lower than the 0.26% m/m estimated by Scotiabank Economics, and higher than the variation for July (0.20% m/m).
- Medium-term inflation expectations improved. Inflation expectations for December fell by 7bps to 5.70% y/y (table 1). Similarly, expectations for the one-year horizon were 4.16% y/y (-13bps). The two-year inflation expectation fell by 8bps to 3.52%.
- Monetary policy rate. The median expectation points to a rate cut of 75bps at the September meeting, a pace of cuts that would be maintained at the October and December meetings until reaching 8.50% at the end of the year (chart 2). Scotiabank Colpatria’s projection is the same as the analysts’ consensus, with three cuts of 75bps for the remainder of the year. While for 2025, Scotiabank Colpatria’s expectation is 5.50%, 50bps higher than the market estimate.
- FX. Projections for the US dollar exchange rate for the end of 2024 averaged 4,044 pesos (5 pesos below the previous survey). For December 2025, respondents, on average, expect an exchange rate of 4,053 pesos (three pesos below the previous survey).
—Sergio Olarte & Daniela Silva
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