Published on Tuesday, August 6, 2019

Colombia | Lowering Rates Not for Everyone

The Federal Reserve reduced its policy rate on July 31, turning its speech earlier this year when it argued the need for additional increases. Similar steps have been taken by other economies, should Colombia follow? Not necessarily because the reality facing Colombia is different.

Key points

  • Key points:
  • The Federal Reserve reduced its policy rate, shifting its year-end speech from possible additional increases needed.
  • Other economies have followed, including Chile and Brazil in the region.
  • Colombia is coming from a late economic slowdown, so it has not yet managed to accelerate to its potential GDP, which could justify reducing rates.
  • However, it also faces a scenario of rising inflation above the 3.0% target and a significant external imbalance, limiting its ability to act.

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