DANE will publish inflation data until September, which is crucial to evaluate whether the slowdown trend, which is above 11%, continues.
The month of October promises to be a relevant period from a macroeconomic perspective. Scotiabank Colpatria’s team of experts analyzes the following topics: local elections, the recess week, inflation, interest rates and the International Monetary Fund’s forecasts on the World Economy.
Impact on the economy of the final phase of local electoral campaigns
The final phase of the electoral campaigns for the local elections will take place in October. The results of the surveys, in particular, the perception of the performance of the national Government in these elections, could generate significant volatility in the markets, the exchange rate and interest rates. Keeping a close eye on what is happening, especially in major cities, will be crucial this month.
At what rate will inflation continue to decline?
On October 10, the National Administrative Department of Statistics (DANE) will publish inflation data until September of this year, which is crucial to evaluate the slowing trend in inflation, which is still above 11%.
At Scotiabank Colpatria, we believe that inflation is gradually slowing, which implies that we should wait a little longer before considering that it is under control. This has two important implications: first, determining whether the Bank of the Republic can begin to reduce interest rates, since a more gradual slowdown limits this possibility; Second, lower inflation also contributes to increasing household purchasing power.
New meeting of the Bank of the Republic, will interest rates be reduced?
At the end of October, the Board of Directors of Banco de la República will meet again to make decisions on the possible reduction of interest rates. Despite the continued slowdown in inflation, the Central Bank is not expected to initiate a decrease in the reference interest rate, as inflation remains in double digits and economic activity appears to remain solid. Therefore, the mandate of the Bank of the Republic to control inflation will continue to be a priority. Interest rate cuts may be considered as early as December.
Will Halloween and the school break week boost economic activity?
October marks the start of the holiday season with events like Halloween and school break week. These dates will serve to evaluate whether the economy, especially household consumption, is improving compared to the slowdown observed in June, July and August of this year. This is relevant since, in the face of an economic recovery, maintaining high interest rates could be a strategy to control inflation.
International Panorama: The IMF presents balance and projections of the world economy
October will continue to see a slowdown, especially in China and Europe, while the United States shows significant resilience, as does Latin America. The heterogeneous slowdown in the world will be accompanied by inflation data in all countries, especially in developed nations, which are considering when to stop raising their interest rates. This will depend on the balance between the economic slowdown and inflation.
This data is crucial as the International Monetary Fund will present projections on the global economy, helping central banks around the world determine their interest rate policies.