The monetary policy interest rate of the Bank of the Republicknown as the intervention rate, is currently at 9.25%.
This rate is the reference with which the central bank lends or receives money from commercial banks in very short terms, and is its main tool to control inflation.
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According to the Issuer, when the aggregate demand (consumption, investment and exports) exceeds the country’s productive capacity, upward pressures on prices appear again. In that scenario, explains that an increase in the intervention rate makes credit more expensive and makes saving more attractive than spending, which tends to moderate the pace of demand.
Interest rate
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He assures that the measure also strengthens the local currency, by encouraging the entry of foreign capital attracted by higher interest rates. In this way, monetary policy contributes to stabilizing both internal prices and the exchange rate.
Effects on the economy and market rates
The decisions of the Bank of the Republic are not limited to the interbank market, since movements in the intervention rate are progressively transmitted to other financial indicators, such as deposit, credit and savings rates. Through this channel, monetary policy influences the general cost of money, affecting consumption, investment and the country’s productive dynamics.
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The Bank also highlights the importance of the real interest rate, which results from discounting inflation from the nominal rate. This value allows measuring the effective impact of monetary policy on the economy.
Interest rate
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The entity mentions that, although the intervention rate is high in nominal terms, its effect can be diluted if inflation remains high, reducing the purchasing power of the returns.
The goals
The central objective of the Bank of the Republic is keep inflation close to its target of 3% annually and, as explained by the tax authority, when observed or expected inflation deviates from that range, the Board of Directors adjusts the intervention rate to redirect market expectations and preserve macroeconomic stability.
However, the entity recognizes that its scope for action faces limitations. External factors, such as international food prices, energy or global financial conditions, can alter the impact of your decisions.
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