NIO: No Policy Shift, Despite High CPI

With inflationary pressures running rampant amid record commodities prices, the Banco Central de Nicaragua (BCN) may decide to rethink its 25-year old policy of a managed depreciation of the córdoba by 5% per annum. We believe that the authorities will look at other measures to rein in inflation for now and do not foresee an exchange rate adjustment this year or next. As such, we have pencilled in end-08 and end-09 forecasts of NIO19.85/US$ and NIO20.84/US$ respectively, in line with current monetary mechanisms.

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