Colombia | BanRep reduces 25bps its policy rate, unanimously, to 9.25%

Summary

The Board of Banrep reduced the monetary policy rate by 25bp to 9.25% in April. This decision was unanimous. On this occasion, they highlighted that inflation and inflation expectations derived from the debt markets declined.

Key points

• Key points:
• The Board of Banrep highlighted the reduction in inflation in March, falling from 5.3% to 5.1%. Regarding inflation expectations, they highlighted that those derived from public debt papers decreased while those from surveys remained stable.
• Economic activity data continue to show some gradual improvement compared to the data observed in 2024. The Bank expects growth of 2.6% in 2025 and 3.0% in 2026.
• Regarding the International Monetary Fund's flexible credit line, the Bank's Governor emphasized that these are resources to attend special contingencies and that although access is suspended, the line is still in force. He emphasized that Colombia has appropriate levels of international reserves and that they are not contemplating a reserve accumulation program.
• In our opinion, this unanimous vote could be interpreted as a sign of greater confidence that the downward rate cycle has resumed. Despite this, it is relevant to note that we are in the midst of an environment of high uncertainty. This decision, viewed in the absence of the recent fiscal challenges, is in line with our stance on the need to materialize larger and faster interest rate cuts to address the needs of investment recovery in the economy.
• We agree with the Bank's Manager, interest rates will tend to be lower in the coming months, although their pace of reductions will continue to be subject to the special conditions governing the global and local economy. However, we emphasize that if fiscal risks are not contained, there is a risk of ending the current cycle with a natural (or terminal) rate higher than the anticipated and historical one.

Geographies

Topics

Tags