The board of directors of the Banco de la República unanimously decided at its June meeting to keep its market interest rate unchanged at 13.25 percent. In this sixth meeting of the collegiate body of the issuing bank, Ricardo Bonilla participated for the first time since he arrived at the Ministry of Finance.
(Also read: The unemployment rate for May 2023 was 10.5%)
Both the manager of the Banco de la República and the Minister of Finance They did not give clear signals about when it will be the moment to start lowering the interest rate, but they agreed that the entity continues to monitor the different indicators of the economy, but especially, the course that keeps inflation going, as well as fuel prices and the evolution of the exchange rate.
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“We have to be very cautious,” said Minister Bonilla, but a positive sign is that the unanimous decision of the bank’s board of directors to leave the intervention rate at the current level, and to the extent that a downward trend in inflation is consolidated, it will be analyzed when the right moment may be to initiating a rate cut, the official said.
Manager of Banco de la República Leonardo Villar during an interview with the newspaper El Tiempo today, October 7, 2022. PHOTO MAURICIO MORENO EL TIEMPO CEET
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Leonardo Villar, for his part, said that the Banco de la República technical team continues to see obstacles to a drop in rates, such as the fuel issue and the observed growth of the exchange rate, but insisted that As expected inflation begins to show much clearer signs of easing, consider changing your current monetary policy stance.
The process of reducing core inflation has already begun, but we hope that this decline will be much more consolidated going forward, specifically, in the second half of the year,” said the manager of the issuing bank of Colombia.
Regarding unemployment, Villar said that there was a slight reduction in unemployment rates and an equally slight increase in the employment rate, but these are clearly positive results. “We will have to see what conclusions the bank’s technical team draws when they study Dane’s figures in more detail in this regard,” insisted the manager.
Analysts and businessmen agree that the bank’s decision to maintain its rate is a good sign for the economy and the country in general, but we will have to wait and see how some variables in the economy behave.
good sign
“The decision, being unanimous, also sends a message about the change in position, so we believe that it is the end of the cycle and not a pause (as can be the case of the Fed),” said Alejandro Reyes, chief economist from BBVA Research, who added that, although the decision is to keep rates stable, a significant confirmation of the inflation trend is required to start a downward cycle in rates.
In this sense, he specified that we will have to wait for the effects of the El Niño phenomenon in this second semester, “for which we believe that the rate reduction scenario could materialize in December of this year.”
For María Claudia Lacouture, president of the Colombian American Chamber of Commerce, AmCham Colombia, the board’s decision takes pressure off the economy, so it would be convenient, then, for the rate cut to begin soon.
“The decision of the Banco de la República to keep interest rates unchanged at 13.25 percent is a good message that will allow, in moments of a possible slowdown, not to generate more pressure on the cost of living of Colombians. It would be convenient in future meetings the Bank will begin to lower rates to accelerate this trend for the benefit of the economy of households and companies to the extent that it depends on consumption”, he pointed out.
Sergio Olarte, chief economist at Scotiabank Colpatria, also agreed that this is not good news, to the extent that he doubts that the cycle of rate hikes will end just as inflation began to slow down.
“We hope that in July the rates will also remain unchanged at 13.25 percent,” said Olarte, for whom what the board hinted at in its meeting yesterday is that with the information that is now available, the idea is not to continue raising the interest rate in the near future.
the center for economic studies AnifFor his part, he believes that the fact that the inflation expectation to continue above the medium-term goal of Banco de la República (3 percent), together with a declining unemployment rate (according to May data published yesterday), may prevent premature easing of monetary policy in the short term.
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