Banco de la República reduced the interest rate by 50 basis points to 11.25%

The Board of Directors of the Bank of the Republic decided, by majority, to reduce the monetary policy interest rate by 50 basis points (bps) to 11.25%.

(Read: Dollar would close the week higher above $4,100).

According to the Issuer’s manager, Leonardo Villar, four directors voted in favor of this decision and two voted for a reduction of 75 bps.

The board of directors took into account that annual inflation in May remained unchanged at 7.2%, while annual inflation excluding food and regulated items fell from 6.4% to 6.1%. Annual food inflation exceeded expectations, increasing from 3% to 4.4%.

(See: Unemployment rate showed improvement in Colombia, Mexico, Chile and Brazil).

Among other factors why the board decided to reduce rates, the survey of economic analysts carried out in June by the Bank of the Republic stands out, which showed in the median of the sample a decrease from 4.6% to 4.3% of the one-year inflation expectation with respect to the May measurement, and stability at 3.8% for expected inflation at the end of 2025.

Inflation expectations obtained from the public debt market were also considered to have remained relatively stable, and although they point to a downward trajectory over time, they remain above the target until the end of 2025. After registering GDP growth of 0.9% in the first quarter, which exceeded the estimates of the Bank’s technical team (0.3%), the indicators for the second quarter suggest that the economy would have continued its recovery path.

(Also: ‘Rate war’: Bancolombia announces interest reduction on housing loans).

Besides, The board took into account the risk premiums for the country and the exchange rate of the peso against the dollar have increased, in a context in which international financial conditions remain restrictive..

“With the decision adopted today, monetary policy maintains a stance in line with the objective of driving inflation to its goal by mid-2025, while offering a new impetus to the recovery of economic growth. The Board of Directors reiterates that Future decisions will depend on new information available,” manager Villar said this Friday.

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