With an inflation that has shown slight decreasesbut that it is still high, nobody in the financial market thinks that the Board of Directors of the Banco de la República, which meets tomorrow, will move the monetary policy rate.
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Instead, everyone’s question is when will it start to come down from the 13.25% level to which he arrived at the April meeting, the most recent in which there was a possibility of moving the rates.
He Finance Minister Ricardo Bonillahas expressed that given the decrease in prices, the aforementioned rate became the ceiling and that in “two or three months maximum” the Colombian central bank can begin to lower rates.
However, there are some elements at stake that could make the Issuer take more time to start lowering the cost of its main rate.
On the external plane there are factors such as the possibility that the Federal Reserve (FED) in the United States will continue raising its interest rates and also that towards the end of the year there will be, in the best of cases, a slowdown.
and that with an iescalation of the conflict in Ukraine with the attacks of Russia, some prices are affected.
To that should be added the possibility that towards the end of the year the El Niño phenomenon will be intense and affect the production and price of some foods.
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Germán Cristancho, Head of Economic Research at Davivienda Brokers, says that the rate drop will be in December, but even so the rate will remain high.
“In the short term, the discussion of lowering rates is not easy since core inflation continues to be high. Colombia among Latin American countries is the furthest behind in the moderation of inflation. Countries like Chile and Brazil have been more successful in bringing down inflation. Economic activity has slowed down since April and that could open a space for the Banco de las República to lower rates.”he emphasized.
Colombian peso
For his part, Daniel Velandia, Executive Director of Research and Chief Economist at Credicorp Capitalconsiders that the first rate cut by the Banco de la República will take place next September.
Felipe Klein, BNP Paribas economist for Latin Americaexpects the cost of the Issuer’s main instrument to remain at 13.25% because “The monetary policy rate is already at a sufficiently contractionary level and both expectations and inflation have started to subside.”
I consider that the next rate movement (of 50 basis points or 0.5%) will be given in the first quarter of 2024.
“We believe that monetary policy will have to be patient and remain in contractionary territory for longer than the consensus expects. In particular, we believe that the El Niño phenomenon will interrupt the decline in inflation expectations towards the end of the year“, said.
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