Colombia | BanRep: a timid start, but a start!

Summary

BanRep, at its December meeting, decided by majority vote to lower the policy rate by 25 basis points to 13.0%. This is its first reduction since September 2020. Two factors stand out in this decision: it initiates a downward cycle and presents a change in the views of three members.

Key points

• Key points:
• In the 24 years of the inflation targeting scheme, this month's decision is among the most complex and difficult. The Issuer is still concerned about high inflation and, even more so, the unique uncertainty about inflation. This makes the decision all the more valuable.
• Economic activity will remain weak. BanRep itself estimates lower growth in 2024 than in 2023 and economic analysts expect a barely appreciable recovery.
• We believe the new balance at the Board is a clear signal of the start of the down cycle, one that if the data supports it, as we believe, will lead to significant rate cuts in 2024.

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