The uncertainty generated by the presidential election in the United States and The depreciation of the peso against the dollar were two key factors that caused the Bank of the Republic to lower the monetary policy interest rate again by 50 basis points to 9.75%.
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What is the price of the dollar in Colombia.
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Four directors voted in favor and three voted for a reduction of 75 basis points.
Leonardo Villar, manager of the Colombian central bank, said that in his policy discussion, The entity’s Board of Directors took into account that annual inflation in September was 5.8%, below 6.1% in August.
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He said that inflation without food or regulated items remained stable at 5.5%, especially due to the persistence of service inflation. The technical team’s total inflation projections for 2024 were revised downwards to 5.3% and market-implied inflation expectations for the end of 2025 remain anchored around 3%. For their part, expectations from surveys remained stable around 3.8% by the end of 2025, Villar said.
He revealed that since the end of 2023 the growth of economic activity has been increasing and on this basis, the technical team of the Bank of the Republic revised upwards its growth projections for 2024 and 2025 to 1.9% and 2.9% respectively.
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For Villar, despite the reduction in the interest rate in September and the forecasts of additional cuts by the United States Federal Reserve, the exchange rate of the peso against the dollar has been showing successive increases, which if they become persistent could generate upward pressure on inflation. This would reduce the room for maneuver to continue with the relaxation of monetary policy at the pace that has been carried out.
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He said that recent exchange rate pressures have been associated with the strength of the dollar globally, the fall in the price of oil and the uncertainty surrounding the fiscal situation in Colombia. The latter is due to short and medium-term factors such as the gap in tax collections, and lack of financing for the 2025 budget. Added to this is the process of the Legislative Act that is taking place in Congress to reform the General Participation System, which could compromise the sustainability of public finances, said the manager of the Issuer.
HOLMAN RODRIGUEZ
PORTFOLIO
