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Colombia Monetary Policy March 2020

Colombia: Central Bank cut rates for second meeting straight

Colombia’s Central Bank (BanRep) axed the benchmark interest rate by 50 basis points to 3.25% at its latest Board of Directors meeting on 30 April in a bid to support the economy amid the Covid-19 pandemic. The decision was unanimous, broadly in line with market expectations and marked the second consecutive cut.

The decision came against a deteriorating economic backdrop due to coronavirus-induced lockdown measures and the collapse in global oil prices. The Bank stated that it was a continuation of its “countercyclical monetary policy stance” and that the decision seeks to support cash flows and provide for a heathy recovery once the health crisis is over. Moreover, the Central Bank also increased and extended liquidity measures in the foreign exchange and local financial markets, announcing an additional USD 1.0 billion of non-deliverable forwards (NDFs) and a renewal of the outstanding USD 2.0 billion of NDFs maturing before the end of May. It will also continue with currency swap auctions for up to USD 400 million in addition to those that were introduced in March, and it announced it will relax the standards for capital requirements and margin calls in case its lender of last resort facility is needed.

As forward guidance, the Bank stated it will continue to keep a close track of the situation and stands ready to take “all the decisions necessary in its authority to contribute to the proper operation of the economy”, noting that there could be additional easing measures to come.

The next monetary policy meeting will be held on 30 June.

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