- Colombia: BanRep Survey—Inflation expectations rose, and analysts don’t expect rate cuts at the June meeting
Colombia’s BanRep released its economists’ expectations survey for May late on Thursday. Inflation expectations rose following the upside surprise in the April inflation reading (5.16% vs 5.0% Bloomberg median). For Dec-2025, headline inflation expectations increased 20 bps to 4.59%. Between a one- and two-year window, it is expected to fluctuate in the upper side of BanRep’s target range (defined between 2% and 4%). These projections are below ours as we estimate year-end inflation at 5.36% and inflation for 2026 would remain slightly above the upper limit of the target, closing at 4.06%, higher than the 3.74% expected by the consensus. In the short term, economists estimate May inflation at 0.38% m/m, which takes headline annual inflation to 5.12%, in line with our forecasts. Inflation is expected to decelerate in May after the 0.66% rise in April, driven by moderate food inflation and slight increases in other items. However, the indexation effect could remain in some items that are not seasonal. Furthermore, there is a perceived risk of a rebound in the second half of the year, which would prevent inflation from falling below 5% in 2025.
Regarding monetary policy, analysts expect rate stability at the June meeting. The minutes of the April 30th meeting revealed that board members initially had differing positions on whether to keep the rate unchanged or cut interest rates. The consensus to cut the interest rate was due to the trend in inflation in March, which fell to 5.09%, in addition to a downtrend in core inflation. However, risks associated with the fiscal outlook and the international context have led the board to maintain a cautious stance and continue to rely on data. Looking ahead to its June 27th meeting, BanRep is expected to positively assess a lower exchange rate, the de-escalation of international trade tensions, and a possible easing of international financial conditions. It is emphasized that, for the June meeting, the Board will have more clarity on the local fiscal outlook, with the Medium-Term Fiscal Framework expected to be published in mid-June. For Dec-2025, interest rate expectations are at 8.25%, and for Dec-2026, it is at 6.75%. Scotiabank Colpatria expects the interest rate to close at 8.75% in 2025 and 7.50% in 2026.
Regarding the exchange rate, the consensus revised its outlook downward for 2025 but expects a higher level in 2026. For December 2025, analysts estimate an exchange rate of 4,288.9 pesos, below the previous one of 4,302.4 pesos. For 2026, the expectation was revised upward to 4,206.8 pesos, compared to the previous forecast of 4,176.4 pesos. Scotiabank Colpatria’s projection for 2025 is 4,367 pesos, and for 2026, 4,364 pesos.
Survey highlights:
- Short-term inflation expectations. For May, the consensus is 0.38% m/m, implying annual inflation of 5.12% y/y, marginally lower than the current 5.16%. The highest forecast is 0.54% and the lowest is 0.15%, showing a moderate dispersion. Scotiabank Colpatria Economics’ projection is 0.38% m/m and 5.12% y/y. Core inflation, excluding food, is projected by analysts at 0.34% m/m.
- Medium-term inflation expectations. Inflation expectations for December 2025 rose 20 basis points to 4.79% (table 1). The expectation at a 1-year horizon decreased by 4 bp to 3.92% (chart 1), and expectations for 2 years decreased by 6 bp to 3.46%. Our forecasts are above consensus, although our skew is mainly explained by strong indexation effects of the minimum wage reflected on services prices, especially housing-related expenses. On the other side, our forecast does not include a significant impact from the FX depreciation as, historically, this effect has been mild and, at this time, is not coinciding with an extra episode that could magnify its effect.
- Monetary policy rate. The median expectation is for rate stability at the June meeting, which would leave the rate at 9.25%. By end-2025, the rate is estimated to fall to 8.25% (chart 2), implying a continued path of 25 basis point cuts at each meeting after June.
- FX. Projections for the US dollar exchange rate for the end of 2025 averaged 4,288.9 pesos (13.5 pesos less than the previous survey). By December 2026, respondents, on average, expect a change rate of 4,206.8 pesos.
—Daniela Silva
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