Colombia: shifting towards interest rate hikes?

There’s a growing debate about whether the Colombian central bank will hike rates. And several plausible triggers – from a pre-election spending spree to a bumper minimum wage hike – could tip the MPC’s balance in this direction. That said, market pricing appears to have shifted up too aggressively. Given how high interest rates are to start with, we suspect that, if BanRep does hike, the tightening cycle will be short-lived and could quickly be reversed after next year’s election.