Banco de la República increases interest rate to 7.5%

The Bank of the Republic raised interest rates by 150 basis points, reaching 7.5%. This is the highest increase in the entity’s history.

For this decision, the Bank took into account the high annual inflation rate which reached levels of 9.23% in April and 9.07% in May. As well as basic inflation without food or regulated items, which went from 5.26% in April to 5.87% in May.

In addition, it was considered economic growthwhich was on the rise in the first quarter of 2022, thanks to the strengthening of domestic demand driven by household consumption.

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“The consumer portfolio registered, in mid-June, an annual growth of 22.1%. The economic monitoring indicator (ISE) showed an annual variation of 11.8% in April, higher than the 8.6% expected,” he said. the banrep.

According to the entity, the recovery of the GDP continues to favor the dynamism of the labor market with sustained job growth. As of May, employment registered an annual growth of 11.0% in the national total and 10.5% in the 13 main cities.

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The current account of the balance of payments showed, in the first quarter of the year, a deficit of 6.4% as a proportion of quarterly GDP, higher than the deficit of 4.1% of GDP for the same period of the previous year. “This excess demand occurs in an environment in which external financing becomes more expensive due to the tightening of international financial conditions.“, says the entity.

Therefore, the Banco de la República announced that the decision, increase the interest rate to 7.5%, “It is compatible with the strength that economic activity has been showing in recent quarters, and it will contribute to positioning monetary policy more quickly on a path that reduces inflation and converges to the target in the medium term.”

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