Colombia | BanRep maintained its benchmark rate in June at 9.25%

Summary

The Bank of the Republic maintained the policy rate at 9.25% in June, with a divided decision. While inflation showed a marginal reduction and growth continues a gradual recovery, they emphasized the larger estimated fiscal deficit and its effect on the economy and the Bank's interest rate profile.

Key points

• Key points:
• The Bank of the Republic maintained the policy rate at 9.25% in June, with a divided decision. While inflation showed a marginal reduction and growth continues a gradual recovery, they emphasized the larger estimated fiscal deficit and its effect on the economy and the Bank's interest rate profile.
• Although annual inflation in May was 5.1%, the reduction was not greater due to rigidity in food and services and a rebound in goods. Inflation expectations from surveys show a delay in convergence to the target.
• The higher fiscal deficit projected for 2025 and subsequent years, along with the activation of the fiscal rule's escape clause, reduce the margin for monetary policy easing.
• The economy is recovering, with 2.7% growth in the first quarter, exceeding the central bank staff's forecasts, and the expansion pace is expected to continue.
• The financial system remains solid, and the Bank's Manager believes that the current policy rate is "clearly" higher than the natural interest rate, which reaffirms the restrictive monetary policy stance.

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