Colombia to Ease Rates in 1Q09

Colombia’s central bank is likely to keep the monetary policy rate unchanged at 10% on Friday, although some shops believe a cut is already due. Credit Suisse LatAm economist Carola Sandy says she expects no change in rates at the upcoming meeting as a majority of central bank board members “think that inflation and inflation expectations are still too high to start easing.” Goldman Sachs senior LatAm economist Alberto Ramos also expects no change, but adds that “there is a 45% probability of a 25bp cut” Friday. Meanwhile, Barclays economist Jimena Zuniga expects a 25bp cut Friday. She says some central bank board members have been calling for a reduction, as inflation expectations have improved. “Inflation is expected to drop to 4.7% by December 2009,” she says. Most economists agree that the rate will be eased in 2009. “By August 2009, we expect the rate to have been eased by 200bp,” says Zuniga. Ramos and Sandy also expect cuts beginning in Q1.