After the last meeting of the year of the Board of Directors of Banco de la República, a majority agreed to increase the interest rate by 100 basis points, which will be 12%.
(Banco de la República would close 2022 with a new rate hike).
The decision is in line with the projections of the market and of analysts who pointed to a rise of 100 basic points (one percentage point) in the guide rate of the Bank of the Republic. However, monetary policy is expected to ease in 2023.
The rate increase of 100 bp was taken taking into account that in November annual inflation maintained a growing trend, higher than expected. Total inflation stood at 12.5% and core inflation (excluding food and regulated items) reached 8.8%. Accumulated exchange rate pressures on prices and indexation to high inflation rates contributed to this result.
For its part, annual GDP growth in the third quarter reached 7.1% and exceeded the forecast of the technical team (6.4%). Despite the fact that in the most recent months there has been a slowdown in economic activity, growth of 8.0% is forecast for the full year.
(Key week for the direction of the dollar and interest rates).
Inflation expectations continue to be above the target at all horizons. In the case of the Banco de la República expectations survey carried out in December, total inflation would be 7.5% and inflation without food would be 7.0% at the end of 2023.
The current account deficit as a proportion of GDP in the third quarter of 2022 reached a historically high level of 7.2%. Although international financial conditions for Colombia have recently improved, they remain tight globally, in a context in which a slowdown in the world economy is expected.
By means of the decision adopted at its session on Friday, December 16, the Board of Directors continues with the monetary policy adjustment process that in the medium term leads inflation to its target of 3%, with sustainable economic growth. To this end, it will adopt the decisions it deems necessary based on the new information available.
BRIEFCASE
