Colombia, Mexico Seen Holding Rates

Goldman Sachs expects Colombia and Mexico to hold rates steady at this week’s meetings. In Colombia, it says the Central Bank to leave the policy rate unchanged at 9.25% to further reassess the domestic and external backdrop. “Although the non-tradable goods inflation dynamics are far from comfortable the negative headline inflation reading for August (-0.13% mom driven by the -1.1% decline in food prices) reduced the odds that the Central Bank will resume the tightening cycle in September,” says Goldman. It adds that price rises will leave it with no option but to hike rates again before the end of the year in order to protect the 2008 inflation target. In Mexico, Goldman predicts that Banxico will keep both the TdF and the corto unchanged at 7.25% and MXP79m, respectively. “Given that inflation remains above the target, we believe that the bias will remain hawkish,” says Goldman.