Colombia: BanRep to hike despite Q2 GDP drop

The sharper-than-expected 2.4% q/q fall in Colombia’s GDP in Q2 was largely due to protest-related disruption in May and masked a strong rebound in output at the end of the quarter. The economic recovery appears to be progressing well so far in Q3, so we still expect that the central bank (BanRep) will begin a tightening cycle at its next meeting in September with a 25bp rate hike (to 2.00%).
Nikhil Sanghani Emerging Markets Economist
Continue reading

More from Latin America

Latin America Economics Weekly

Central banks and Omicron, Colombia CA risks

The emergence of the Omicron variant presents a key risk to economic recoveries in the region, although the experience from the latest virus wave in the region provides a reason to think it will not result in a permanent hit to output. In the meantime, central banks across the region will remain focussed on tackling high inflation with further rate hikes. Otherwise, data this week showed that Colombia's current account deficit widened even further in Q3 and the recent drop in oil prices will add to the growing external vulnerabilities there.

3 December 2021

Latin America Data Response

Brazil Industrial Production (Oct.)

The surprise 0.6% m/m fall in Brazilian industrial production in October and weakness in the surveys for last month provide early evidence that the contraction in the economy last quarter may be followed by another q/q drop in GDP in Q4.

3 December 2021

Latin America Data Response

Brazil GDP (Q3 2021)

The 0.1% q/q fall in Brazilian GDP in Q3 confirmed that problems in the agricultural and industrial sectors tipped the economy into a technical recession. And with financial conditions tightening, the terms of trade worsening, and the threat from the new Omicron variant, the risks to our GDP growth forecast for next year of 1.3% are skewed firmly to the downside. Copom may temper its hawkish sentiment a bit at its meeting next week, with a 150bp hike (rather than 175bp) now looking more likely.

2 December 2021

More from Nikhil Sanghani

Latin America Economics Weekly

Peru & Mexico hikes, Chile’s public spending spree

Peru’s central bank, under the renewed stewardship of Governor Julio Velarde, started its tightening cycle yesterday with a 25bp rate hike, to 0.50%, and we think that rates will rise to 2.75% by the middle of next year. Elsewhere, there was another split vote as Mexico's central bank also hiked its policy rate by 25bp (to 4.50%) and we think its tightening cycle will end sooner than most investors currently expect. Finally, the fresh fiscal stimulus announced by Chile's government will give a boost to the economic recovery, but it is another worrying sign of a shift away from pragmatic policymaking.

13 August 2021

Latin America Economics Update

Banxico’s tightening cycle progressing slowly

Mexico’s central bank hiked interest rates by 25bp, to 4.50%, yesterday but the split vote suggests that the tightening cycle will continue to proceed slowly despite the growing inflation risks. This reinforces our view that the policy rate will continue to rise over the coming months to 5.50% by Q1 2022, with the tightening cycle likely to draw to a close earlier than most investors currently expect.

13 August 2021

Latin America Data Response

Mexico Industrial Production (Jun.)

The surprise 0.5% m/m fall in Mexico’s industrial production in June was driven by broad-based declines across sectors, including further disruption to auto production. Industry probably continued to struggle in July and the severe third virus wave suggests that conditions may get worse before they get better.

11 August 2021
↑ Back to top