Rate Hike And More To Follow

June 2006 | Market Strategy

The Colombian central bank, BanRep, acted in accordance with our expectations yesterday in raising its intervention rate by 25bps to 6.50%. Although, as the accompanying chart illustrates, inflation remains well under control and apparently on a downward trajectory, the central bank has been particularly hawkish since it embarked on this tightening cycle with a 25bps rate hike back in April. Indeed, CPI in May came in right on the floor of the central bank's 4.0% to 5.0% year-end target range, but the central bank is, in our assessment, acting prudently to take pre-emptive measures against inflationary pressures, thereby keeping expectations well under control.

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