In a recent analysis, GCB Capital Research sheds light on the evolving economic landscape, projecting a pivotal shift (loosening) in monetary policy by March 2024.
According to GCB Capital Research, a resolute return to fiscal consolidation, a persistently tight monetary policy stance, and the absence of Central Bank deficit financing, coupled with sweeping reforms, have been instrumental in steering the disinflationary course so far in 2023.
The analysis by the investment firm underscores a marked alleviation in both headline and core inflation, witnessing a substantial retreat from their zeniths of 54.1% and 53.2% in December 2022 to 35.2% and 36.2% in October 2023. This disinflationary trajectory is expected to persist into 2024, underpinned by the unwavering tight monetary policy and the ongoing suite of economic reforms.
Anticipating a pronounced downturn in headline inflation over the next reporting cycles, GCB Capital Research envisions a below 30% inflation figure for November 2023, with the year-end projection settling around 25%, propelled by favorable base effects. Boldly predicting a convergence towards the 20% mark for both headline and core inflation by February 2024, barring unforeseen seasonality-induced exchange rate fluctuations and external shocks.
The critical aspect of the analysis lies in the forecasted pivot (loosening) in monetary policy, slated for March 2024. As inflation steadily veers towards the medium-term target, GCB Capital Research anticipates a strategic realignment in monetary policy to bolster economic growth. The report underscores the crucial role of low inflation expectations becoming entrenched in the forthcoming transition from policy tightening to policy loosening.
However, the analysis remains cognizant of potential risks, notably seasonality-induced exchange rate fluctuations and external shocks, which could influence the trajectory outlined in the report. As the economic landscape continues to evolve, GCB Capital Research provides a nuanced perspective on the delicate interplay between fiscal policies, monetary dynamics, and inflationary trends.