06:39 AM
The main banking entities in Colombia anticipate that The Bank of the Republic will reduce the interest rate at its meeting this Friday, June 28, placing it at an average of 11.25%.
This means that the market has already projected a 50 point cut in the rates of the Bank of the Republic.
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This expectation is based on the most recent Citibank expectations survey, which collects the opinions of entities such as bAnco Agrario, Axa Colpatria, XP Investment, Shares and Securities, Bancolombia Group and Banco de Occidente.
The projections for the interest rate at the end of 2024 range between 8.50% and 9.25%with entities such as Fiduoccidente, Casa de Bolsa, Corficolombiana and Positiva aiming for the lowest values. In contrast, entities such as Banco Agrario and XP Investment foresee higher rates, close to 9.25%.
These fluctuations take into account that the minutes of the April meeting of the board of directors of the Bank of the Republic confirmed that the majority group of co-directors continues to prioritize caution in the pace of monetary policy rate cuts, because it limits the risks to the credibility of meeting the inflation target and could generate abrupt increases in the exchange rate that would result in new inflationary pressures.
Furthermore, they mentioned that the possibilities of The US Federal Reserve (Fed) postpones interest rate cuts, deteriorating international financial conditions and further limits the room for rate cuts at the local level.
Factors that influence expectations
In that order, according to Corficolombiana, expectations of a cut in the interest rate are based on various factors, among them stands out the disinflationary process, which paused in May, due to the upward pressures of the El Niño phenomenon on the prices of perishable foods and the regulated food basket.
It will also be taken into account the positive GDP growth surprises in the first quarter of the year, the growth of the Economic Monitoring Indicator (ISE) and the labor market in April, These suggest that the economy has already begun to recover, although slowly.
Besides, Twelve-month inflation expectations remain higher than previously expected, although they have been declining. And rents continue to rise sharply and it is still unknown whether they will remain that way or fall in the coming months.
Therefore, experts such as Adrián Garlati, director of the Economics program at the Javeriana University, consider that The Bank of the Republic could maintain the interest rate or reduce it slightly due to stagnant inflation.
On the other hand, Diego Gómez, local economic analyst at Corficolombiana, expects a cut of 50 basis points in the rate, with a closing rate projection of 8% for 2024.
Finally, a survey conducted by Anif revealed a consensus among analysts on the extension of the easing of monetary policy of the Bank of the Republic.
The survey predicts an interest rate between 8% and 9% by the end of 2024, coinciding with the expectation of a continued decrease in inflation and the possibility of new cuts in the rate to stimulate the economy.
In general, expectations point to a cut in the reference interest rate by the Bank of the Republic this Friday, with projections that range between 8% and 9.25% for the end of 2024.
The Bank’s final decision will be based on the evaluation of various economic indicators and their impact on inflation and growth in the country.
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