Virtually all foreign exchange market agents and analysts are betting on a rise of 100 basis points (one percentage point) in the guide rate of the Banco de la República today, but they assure that in 2023, although it will start with a new rise, this will be of a lesser magnitude since inflation is expected to begin to drop.
Thus, the monetary policy rate with which 2022 will end would be 12%, a level not seen since February 2001 and the cost of living index for December would close between 12.6 and 12.7%.
Under these conditions, what is expected is that less demand will begin to be seen, since the transmission towards commercial banking has already made credit more expensiveespecially the cards.
(See: Key week for the direction of the dollar and interest rates).
Proof of this is that according to a Bancolombia report, in the first week of December, consumption registered an annual decrease in real terms of 23%.
As in previous weeks, the results reflect a slowdown process, derived from a complex economic context with increases in price levels and upward adjustments in interest rates.
Carolina Monzón, manager of Economic Research at Itaú Colombia, points out that there have been significant surprises in iinflation and also CPI expectations for 2023 and 2024 they accelerated and to that is added the current account deficit.
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He said that a rate of 12.50% will be seen, which should be maintained until the price increase is mitigated, to then correct and see a closing of 2023 at 10%.
José Ignacio López, executive director of Economic Research at Corficolombiana, awaits “an additional 50-point hike in January 2023, pending a more benign and calm outlook.”
Although many say that inflation would enter moderation ground, others still see some risks.
Camilo Pérez, head of investigations financial statements of Banco de Bogotá analyzes that “In January 2023 there will be 50 additional basic items and that could be the terminal, but with an upward bias as prices tend to rise and are pushed upward by food.”
(See: Banrep launches inflation forecasts for 2023 at the minimum table).
On the other hand, Ana Vera, chief economist at the firm In On Capital, say what “The rate of increases will be maintained at least until real rates return to being positive and high inflation is mitigated. At this time, annual inflation is at levels above 12.5%, which means that the difference between the reference rate and inflation is still negative and is not completely restrictive to mitigate the upward trend in prices.”
The economist considered that an increase of at least 1.5% would be ideal“but understanding the messages of the last press conferences we see that the board of directors of the Banco de la República is divided and such a radical position to control inflation is not the consensus.”
For his part, Sergio Olarte, Principal Economist at Scotiabank Colpatria estimates that the reference rate will remain at 12%, “This is because inflation is still not peaking and the economy is still healthy.”
The economist assured that by January of the following year it is expected that the Issuer will decrease the rate increase rate by half a percentage point, to reach 12.50%, which would be the last increase and would remain so for 6 to 8 months.
(See: Olga Lucía Acosta is appointed as co-director of Banco de la República).
Bancolombia forecasts a 100 bp increase in the Issuer’s rate, which would bring it to 12%, a level not seen since February 2001.
In that way, according the bank, the monetary authority it would be closer to finishing the cycle of increases that began in September 2021.
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