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Colombia Monetary Policy April 2022

Colombia: BanRep continues to tighten conditions in April

At its 29 April meeting, the Board of Directors of Colombia’s Central Bank (BanRep) voted to increase the benchmark interest rate by 100 basis points to 6.00% from 5.00%. The move—which largely met analysts’ expectations—marked the sixth consecutive rate hike, amounting to a cumulative 425 basis points of increases since the gradual tightening of conditions began in September 2021. While the decision to hike the rate was unanimous, the vote was once again split with regard to its size, with three of the seven board members voting for a bigger 150 basis-point rise.

The decision was driven by persistently high price pressures and the continued upward trends of both core and headline inflation—exacerbated in recent weeks by the war in Ukraine. Consequently, headline and core inflation projections were once again upwardly revised, with the latter seen at 7.0% in 2022 and 4.0% in 2023—well above BanRep’s 2.0–4.0% target band. Additionally, the impact on prices of a prolonged conflict in Ukraine and the Fed’s potential acceleration of rate hikes posed upside risks to the outlook. Further, high-frequency data reveals a continued healthy economic performance—the 2022 and 2023 growth forecasts were upgraded—providing more room to continue its path of gradually adjusting the monetary policy stance.

While the Bank did not provide explicit forward guidance, it reiterated its “commitment to a gradual but steady adjustment of monetary policy that would guarantee the progressive return of inflation to the 3.0% annual target”.

The next monetary policy meeting is scheduled for 29 June.

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