With the announcement thatwhich would leave its main interest rate unchanged at 13.25%, The Board of Directors of Banco de la República ended 18 months of interest rate hikes to face inflation.
(See: The Bank of the Republic decided to keep rates at 13.25%).
The entity’s general manager, Leonardo Villar, said that in its policy discussion, the Board took into account that inflation continued to decline in May led by the decline in food prices.
assured that inflation rates for regulated items and services (without food or regulated) increased. Total (12.4%) and core (10.5%) inflation measures remain far from the 3.0% target.
For the manager, the inflation expectations of economic analysts they continued to decrease and are located at 6.4% at 12 months and at 4.0% at 24 months. By the end of 2024, they are located at 5.0% in the median of the sample.
Likewise, he said that GDP registered an annual growth of 3.0% in the first quarter of 2023. The loss of dynamism in economic activity continued in April, as shown by the indicator for monitoring the economy (ISE).
The moderation in the dynamism of domestic demand has led to a significant adjustment in the external imbalance of the country, whose current account deficit fell to 4.2% of GDP in the first quarter of 2023, compared to a deficit of 6.2% in 2022.
Villar emphasized that in recent months, the peso has appreciated significantly and risk premiums for Colombia have decreased substantially. This has occurred in the context of high uncertainty in the global economy and a reduction in international oil prices.
In the same way, he assured that with the decision, the monetary policy continues with its objective of bringing inflation towards its target of 3.0%. Further decisions by the Board will depend on new information available.
He warned that the monetary policy rate is contractive it is above inflation and exceeds inflation expectations at any term.
(See: ECB interest rate hikes to continue in July).
“This monetary policy rate will help inflation converge to the target. If it continues to decline and expectations continue to decline, it will be possible to have lower rates that could be contractive. It depends on inflation and expected inflation, and if they go down, it is possible to see rates go down and inflation move in the desired direction.
We will monitor with the information available and at the right time it will be done”.
For his part, Finance Minister Ricardo Bonilla said that there are favorable factors for inflation to drop.
The head of the Treasury portfolio said that “food and the producer price index have fallen and the tendency is consistent to have lower prices, but there remains a determining factor for the rise in inflation, which is the adjustment in fuel prices. We monitor it so that inflation does not reactivate. When the drop is consolidated, the intervention rates may be lowered.”
Bonilla, who attended a press conference for the first time after the Board of Directors, said: “We want to be cautious in the decision and that is good; that the rate remained unchanged and we would have to wait four or five months and see when the rate can be lowered. Today experience tells us that it (inflation) will go down, but we have to see what the El Niño phenomenon can bring in terms of possible effects on crops and the adjustment of fuels before making a decision to lower rates ”.
Villar emphasized that the most probable scenarios say that the reduction in inflation will continue as has been said.
“The forces today are greater; the exchange rate has appreciated, international prices are coming at a slower pace or falling, a demand that has been adjusted internally and that helps curb the price increase, but you have to look at the fuel adjustment process, which is a healthy policy of not granting subsidies to those who should not be beneficiaries and this adjustment helps the solidity of public finances”.
(See: Nequi reduces interest rate for ‘lifesaving’ credit modality).
But warned that there are some risks that are difficult to quantify, such as the possibility of an El Niño phenomenon, that could affect next year’s inflation and we have to see the evolution of the weather conditions and what it would affect.
Villar revealed that a strong El Niño phenomenon could affect headline inflation between 1 and 1.5 percentage points.
Bonita for her part He emphasized that today there is a slowdown, but to stimulate growth in the second semester, civil works and housing construction must be reactivated, and he considered that public spending does not act against inflation.
In addition, the Minister of Finance said that the adjustment of fuel rates continues on the issue of gasoline and then, when finished, comes diesel and Acpm.
ANDthe general manager of Banco de la República, Leonardo Villar, said that the data from the Indicator for Monitoring the Economy was a negative surprise but the growth indicator is positive and the two indicators offset each other.
Superfinanciera certified low interest rates in July
Based on the weekly information reported by the credit institutions during May 27 and June 23, the Financial Superintendence issued Resolution 0945 by means of which it certifies the Current Bank Interest for the modality at 29.36% effective per year. of consumer and ordinary credit, which will be valid between July 1 and 31, 2023.
The new certification represents a decrease of 40 basis points (-0.40%)
compared to the one in force in June 2023 (29.76%).
Current bank interest is the basis for calculating the maximum value of remuneration and late payment interest and for determining the effects of the usury rule defined in the Penal Code. Thus, the remunerative and late payment interest is 44.04% effective per year and usury is 44.04% EA. These results represent a decrease of 60 basic points (-0.60%) with respect to the previous period.
(See: Dane recognizes the Financial Superintendency for calculating rates).
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