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Colombia Monetary Policy April 2023

Colombia: BanRep raises policy rate by 25 basis points in April

At its 28 April meeting, the board of directors of Colombia’s Central Bank (BanRep) raised the benchmark interest rate by 25 basis points, from 13.00% to 13.25%. The market had expected BanRep to stand pat. The move marked the 14th consecutive rate hike and amounted to a cumulative 1,150 basis points of increases since the current tightening cycle began in September 2021. Four board members voted for the decision; two voted for no change, and one voted for a 50 basis point hike.

Core inflation continued to rise in March, and headline inflation was stable at the highest rate since 1999. In addition, year-ahead inflation expectations remained above target at 7.0% in April (March: 7.2%). This inflation environment pushed BanRep to hike rates to ensure inflation converges to the 2.0–4.0% target in the medium run. The Bank also noted that economic activity had weakened more slowly than expected, giving it more leeway to hike.

In its press release, BanRep avoided giving explicit forward guidance, saying that future decisions will depend on the information that becomes available. Nonetheless, given the slowing economy and the recent deceleration of inflation expectations, most of our panelists believe that the Bank has reached the end of its hiking cycle. Our panelists expect BanRep to begin lowering rates by the end of the year.

The next monetary policy meeting is scheduled for 30 June.

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