The Bank of the Republic (monetary authority) of Colombia cut interest rates by 25 basis points this Wednesday for the second consecutive time, which was set at 12.75%, due to an improvement in inflationary trends in recent months.
“In December, annual inflation fell for the ninth consecutive month and at the end of the year (2023) it stood at 9.28%, in line with the projection of the technical team“, highlighted in a statement the Board of Directors of the Bank of the Republic.
The reduction in reference rates was approved at the monetary authority’s first meeting of the year and is the second consecutive cut since last December a drop of 25 basis points was also approved.
“There was a consensus regarding the need to lower interest rates“, said the manager of the Bank of the Republic, Leonardo Villar, in a press conference, adding that five of the seven directors of the Board voted in favor of this decision and two did so for a larger cut, of 50 basis points.
According to Villar, the majority of directors did not consider the 50 basis point cut prudent because there may still be factors that affect inflation. “which is the third highest in Latin America, after Venezuela and Argentina”, and that can prevent later “reach lower interest rates.”
“Most measures of inflation expectations were reduced and indicate a downward trajectory of inflation over time“, added the statement in which it is emphasized that also “External financial conditions have improved, in an environment of global inflation with a decreasing trend and a smaller deceleration of the world economy compared to what was projected.”.
The Colombian president, Gustavo Petro, expressed in his X account his gratitude to the Bank of the Republic for having “decided to lower the interest rate”, while his Minister of Finance, Ricardo Bonilla, stated in the press conference that he expects more cuts throughout the year.
“For the second consecutive session, the intervention rate of the Bank of the Republic decreases, in both cases it was 25 points, I would have preferred it to be 50″said the minister.
Bonilla added that he hopes “ending the year at an intervention rate close to 8%, that means that in the next meetings we have to make more far-reaching cuts”.
The minister also said that the interest cut sends “a message to the financial sector that rates have definitely begun to fall“because Colombia is controlling inflation”and it is up to the banks to follow this message”.
The next meeting of the Bank of the Republic to examine interest rates will be on March 22.
Source: Gestion
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