Colombia Monetary Policy December 2021


Colombia: BanRep delivers third consecutive rate hike in December

December 17, 2021

At its 17 December meeting, the Board of Directors of Colombia’s Central Bank (BanRep) opted to raise the benchmark interest rate by 50 basis points to 3.00% from 2.50%. The move marked the third consecutive increase, following earlier hikes in September and October. While the decision to raise 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 75 basis-point hike.

The decision was largely due to inflation climbing more than expected in October and core inflation also continuing its upward trend, prompting BanRep to upgrade its inflation forecasts to 5.3% and 3.7% for 2021 and 2022, respectively. As such, the Bank sees inflation remaining above the midpoint of its 2.0%–4.0% range in the medium term. Moreover, high-frequency data suggests that GDP continued to expand in the final quarter of the year, with the Bank’s 2021 growth projection at 9.8%, which would bring the economy back to pre-pandemic levels. Consequently, BanRep deemed it appropriate to continue withdrawing monetary stimulus.

BanRep did not provide strong forward guidance in its communiqué. However, it seems that if inflation continues to increase, the Bank will tighten its conditions at a faster pace. Consequently, many of our panelists see the benchmark interest rate ending 2022 at 4.50%.

The next monetary policy meeting is scheduled for 18 January.

LatinFocus Consensus Forecast panelists see the policy rate ending 2022 at 4.52% and 2023 at 4.61%.

Author:, Economist

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Colombia Monetary Policy Chart

Colombia Monetary Policy December 2021

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

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