The Board of Directors of the Bank of the Republic meets this Friday to decide whether to continue lowering interest rates that are at a level of 11.75 percent.
According to the criteria of
Although in May inflation stagnated at the same levels recorded in April (7.16 percent annually), Market analysts expect the Issuer to continue with its path of relaxing monetary policy.
Although rates have dropped, they are still high for borrowing.
Photo:EL TIEMPO Archive
A survey by the economic research centre Anif, which took into account 20 market analysts, shows that 13 of them agree that the rate should be lowered by 50 basis points to 11.25 points.
Analysts also expect that there will be less consensus on the Board this time compared to the April decision: 85 percent believe there will be two dissenting members while 10 percent believe there will be three and 5 percent believe there will be only one member.
Furthermore, according to the latest Financial Opinion Survey (EOF), prepared by Fedesarrollo and the Colombian Stock Exchange (BVC), For June and September, analysts expect the intervention rate to be 11.25 and 10 percent, respectively.
The Findeter Economic Studies Department also expects the Issuer’s board of directors to continue the cycle of reductions and make a cut of 50 basis points at this meeting, placing the rate at 11.25 percent.
The manager of the Bank of the Republic, Leonardo Villar.
Photo:Cesar Melgarejo / THE TIME
“The decision is made in a context in which the latest available inflation data surprised the market: annual inflation in May 2024 was equal to that recorded in April 2024 (7.16 percent),” they said.
According to Findeter, an important element that may weigh on the decision of the Bank of the Republic this Friday is the weak economic performance that the economy has been presenting, with a growth of 0.7 percent in the first quarter of the year.
“Likewise, They must consider the possible effects on inflation of the national government’s decision to adjust the price of ACPM to large consumers of this fuel. Finally, new pressures on food prices could be generated in connection with the intensity of the La Niña phenomenon in the second half of the year,” they said.
For her part, Clara Escobar, executive director of the Association of Financing Companies (Afic), said that there is great expectation surrounding the possible reduction of interest rates due to the positive impacts it would have on the Colombian economy.
“A decrease in rates would not only represent relief for debtors, but also contributes to boosting the economy by reducing the cost of credit and encouraging investment and consumption,” he said.
Bank of the Republic.
Photo:The Weather / courtesy
And he added: “The reduction promotes the demand for credit and makes it easier for debtors to meet their payments, improving the quality of the portfolio. However, it is crucial to make all efforts from the Government and companies to reactivate the economy, which entails stimulating key sectors such as construction, industry and commerce, which are also great job generators.”
By the end of 2024, in response to the internal and local context, the entities surveyed by the economic studies center Anif They discount an interest rate of between 8 and 9 percent (8.65 percent on average), which would again imply a cut of between 325 and 425 basis points until the end of the year.
According to the Fedesarrollo survey, the intervention rate is also expected to be 8.50 percent in December 2024, remaining stable compared to the 8.50 percent expected the previous month.
