Strong Economic Recovery, High Inflation In Colombia Will Prompt Additional Interest Rate Hikes

• Colombia’s Banco de la República (BanRep) will hike its policy interest rate over the coming months to help contain inflationary pressures and anchor inflation expectations amid a strong economic rebound, according to Fitch Solutions.  
• The BanRep is forecast to raise its policy interest rate to 3.00% by end-2021, from 2.50% currently, and hike to 4.50% by end-2022. Inflation will end 2021 at 5.2% y-o-y, for an annual average of 3.4%, and average 4.3% in 2022. 
• Risks to the agency’s interest rate forecasts are weighted to the upside, particularly if Colombian inflation remains above target for longer than Fitch anticipates, or if the US Federal Reserve tightens monetary policy more aggressively than expected.

(Source: Fitch Solutions)