Publications

The Bank of the Republic will maintain stable interest rates through the remainder of 2025, with gradual reductions in the second half of 2026. This cautious approach responds to persistent inflation, strong consumption dynamics, and fiscal risks.

In July, the Central Bank of Colombia kept the policy rate at 9.25% in a split decision. Although headline inflation eased slightly and economic activity showed more momentum, the Board highlighted the stability of core inflation and inflation expectations, as well as strong domestic demand, justifying a restrictive stance.

The Banco de la República kept its interest rate unchanged in March, in a context of mixed variables surrounding the decision. In the end, the Bank prioritized economic stability, offering a significant demonstration of independence and technical expertise.

The Board of the Banco de la República kept the policy rate unchanged at 9.5% in a split decision (4 to 3). The decision was based on inflationary and fiscal risks, as well as external uncertainty.

Given more synchronization of economic growth and inflation between Mexico and the US due to the presence of Global Value Chains (GVC), the cost of protectionist measures in the latter (the imposition of a 10% universal tariff on all imported products) on activity, inflation and welfare of the former would be amplified.

Banxico looked past the jump in headline inflation, rightly so in our view, with core inflation easing and cut the policy rate by 25bp to 10.75%, as we anticipated. It anticipates that lower inflation pressures may allow further rate cuts going forward.

The historically large China-US rate reversion triggered corporations to finance their businesses in RMB due to its lower funding costs compared to USD, which had been the historical norm for corporate financing.

The indebtedness of different agents remains below that of peers. The composition of external debt has been shifting among the borrowers since 2018. There is the increasing trend led by public, compared to the ongoing decline in the private sector.