In the midst of a relentless slowdown and tax collection that is not picking up and that has even been confirmed by the Dian that it will not meet its goal for this year, the country remains in expectation of the next meeting of the Board of Directors of the Bank of the Republic, where it will be decided what is coming in terms of monetary policy.
Although the Government and various sectors have called for flexibility on the part of the monetary authorities, the recent unemployment and inflation figures, as well as the possibility that the pace of the economy will remain stagnant, will be some of the points of analysis at the issuer, whose heads remain divided on what to do with interest rates.
It should not be forgotten that one of the claims against the Bank of the Republic It is the choice of the interest rate as an instrument to intervene in the economy and it is not unusual to hear voices asking why it does not take advantage of the fall in inflation to lower these references more quickly, while this institution continues to maintain caution.
Bank of the Republic
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New cuts
A recent report by Corficolombiana’s economic research team stated that although Emisor has been cautious and cautious regarding the possibility of lowering rates in an accelerated manner and has even gone so far as to think that the reduction could be temporarily paused, they project that the news from the next meeting will be positive for the economy.
“The BanRep Board will make its fifth monetary policy decision this year on Wednesday. We expect a 50 basis point (bps) cut in the Monetary Policy Rate (TPM) to 10.75%, from 11.25%,” they said.
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At this point, they warned that most of the co-directors will maintain a cautious stance and, before accelerating the pace of interest rate cuts, will wait for inflation to resume its downward trend and inflation expectations to consolidate within the target range.
“Since the last meeting a month ago, inflationary risks have remained balanced. Between May and June, core inflation fell from 6.13% to 6.01%, while headline inflation rose slightly from 7.16% to 7.18%, confirming the anticipated disinflationary pause for the second quarter,” they indicated in a report.
Corfi analysts added that according to Banrep’s survey of analysts, inflation expectations for one year fell for the eighth consecutive month, from 4.3% in June to 4.23% in July. However, they point out that these expectations remain above the upper range of the 4% target, and their reduction has slowed, supporting the Board’s cautious stance.
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“It is worth noting that the 12-month inflation implied by the TES is already “The GDP growth rate was at 3.85% last week. In terms of economic activity, the positive surprise of GDP growth in the first quarter of the year was accompanied by better-than-expected data from the Economic Monitoring Indicator (ISE) in April and May. The surprises have been explained mainly by the good performance of the public administration sector, but key sectors such as construction, industry and commerce remain in contractionary territory,” they said.
In this way, they concluded by saying that the fiscal adjustment announced by the Ministry of Finance and the possibility of making additional spending cuts if necessary will be key to the next decisions of the Banco de la República and that although the effort shown by the Government to reduce spending is positive, fiscal responsibility will affect economic growth, “which is why we believe that the Bank will give more weight in the coming months to the countercyclical role of monetary policy.”
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At this point it should be noted that, according to co-directors of the Bank of the Republic, the choice of the interest rate as an instrument of monetary policy, “is not only consistent with the constitutional mandate of the Bank, but is also a result of the inflation strategy objective on the basis of which monetary policy operates in Colombia and in many countries around the world.”
