Colombia Monetary Policy October 2021


Colombia: BanRep delivers second rate hike in October

October 29, 2021

At its 29 October meeting, the Board of Directors of Colombia’s Central Bank (BanRep) decided to raise the benchmark interest rate by 50 basis points to 2.50% from 2.00%. The increase followed September’s hike, which had marked the beginning of monetary policy normalization. While the decision to raise the rate was unanimous, the vote was once again split with regard to its size, with two of the seven board members voting for a 25 basis-point hike.

The decision was largely due to a stronger-than-expected economic performance, with the Bank upgrading its growth forecasts for 2021 and 2022 to 9.8% and 4.7%, respectively. Moreover, inflation came in above expectations in September, prompting the Bank to upwardly revise its inflation projections to 4.9% for end-2021 and 3.6% for end-2022.

In its communiqué the Bank did not provide strong forward guidance. However, it seems likely that if inflation continues its upward trend, the Bank will continue to tighten conditions. As such, most of our panelists have penciled in another increase of between 25 and 50 basis points at the Bank’s final scheduled meeting of the year, and the majority foresee further normalization of monetary policy in 2022.

Commenting on the minutes of the meeting, economists at Scotiabank Colpatria, said:

“Minutes revealed that despite the positive economic growth view there is a different level of concerns about the source of current growth but also regarding future risks. That said, the hawkish group expressed they are uncomfortable with the recent credit and inflation dynamics, while the dovish group is worried about the implication of a stepped hiking cycle would mean for the recovery. All in all, we expect Banrep to make a new 50 bps rate hike in the December’s meeting, as staff signaled the GDP gap would close faster and core inflation would close 2022 close to the ceiling of the target range. For 2022, we expect gradual hikes, closing the year at 5% (previous expectation 4.50%).”

The next monetary policy meeting is scheduled for 17 December.

LatinFocus Consensus Forecast panelists see the policy rate ending 2021 at 2.38% and 2022 at 3.60%.

Author:, Junior Economist

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Colombia Monetary Policy Chart

Colombia Monetary Policy November 2021

Note: Central Bank policy rate in %.
Source: Colombia Central Bank (BanRep).

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