Tuesday, 3 February 2009

Colombian Brokerage Alianza Valores Bets on Aggressive Rate-Cutting in First Half

Colombia was the first Latin country that joined the global monetary policy easing in full fashion. Alianza Valores, a local brokerage, is betting that the rate-cuts will be aggressive in the first six months of 2009 -- and offers a good number of reasons for its reasoning. First, the numerous dissent that called for a higher easing than the 50 basis-point reduction that took place last week. Second, the language about inflation risks was way softer than before. Third, the Banco de la Republica board of directors was concerned about growth trends, citing the worrisome behaviour of the external, manufacturing and services sectors going forward. And, last but not the least, fourth, the bank is clearly pointing to more reductions in the Repo rate. Enough reasons, isn't it? Well, my comment is that now that the government open its cards about the fiscal trends, the bank felt much more assured about using monetary policy as an effective anti-recession instrument.

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