Colombia | Banco de la República raised its monetary policy rate by 100 bp to 5.0%

Summary

The Board of Directors of Banco de la República increased its monetary policy rate by 100 bp, from 4% to 5%. The vote was split, with 5 members in favor of a 100 bp increase and 2 in favor of 150 bp. The decision was mainly based on the high levels of inflation in the country.

Key points

• Key points:
• The Board of Directors of Banco de la República increased its monetary policy rate by 100 bp, reaching 5% and being the highest increase since 2003.
• They highlighted the high level of inflation in the country, where in February it reached an annual variation of 8.01%. In addition, they also mentioned that there is a high uncertainty about food inflation due to the current geopolitical scenario.
• The Board highlighted the good performance of the economy in the first months of the year. In terms of forecasts, the bank revised upwards the expected growth from 4.3% to 4.7%.
• It was also mentioned that the Russian invasion of Ukraine could further affect the prices of basic goods, such as food and agricultural inputs.
• Although the increase was lower than expected by BBVA Research, we maintain our expectation that the Bank of the Republic will sustain the upward trend in interest rates in the coming months.

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