For the second time in a row, The Banco de la República raised interest rates by 150 basis points, reaching 9% in June 2022. This was announced by Leonardo Villar, manager of the monetary authority.
(OECD reviews the ‘gaps’ in the Colombian tax system).
“With the decision adopted in its session today, the Board of Directors continues with the process of adjusting the monetary policy that guarantees the return of inflation to the 3 percent target in the medium term”Villar noted.
And he added that: “We are closer to levels that help converge inflation towards the goal. We are closer to the levels required to manage the situation, and we will have to assess whether it is necessary to continue increasing the interest rate (…) but it would seem that it would be smaller magnitude than those we have seen so far.
One of the reasons that Banrep took into account to make this decision is that the variation in the cost of living of Colombians maintains its upward path and stood at 9.7 percent in the sixth month of 2022. In addition, the phenomenon of runaway inflation worldwide, which has increased fears of a global recession and generated great volatility in financial markets.
Of course, the financial authority stated that Colombia’s economic activity remains strong. “The country is presenting a good performance in foreign direct investment, arrival of resource flows in portfolio investment, and also a large flow of collection resources at the international level,” said the Minister of Finance, José Manuel Restrepo.
Restrepo also highlighted Banrep’s contribution to Colombia’s economic dynamics at a good time. “The Bank is a great protagonist, through an expansionary monetary policy. The International Monetary Fund (IMF) pointed out that one of the great protagonists of Colombia having one of the best growth rates of the OECD countries derives from the bank’s monetary policy,” he explained.
It is worth noting that as IMF improved that projection for the country, and indicated that its GDP would grow this year by 6.3 percent, from the 5.8 percent forecast last April.
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