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Colombia Monetary Policy March 2024

Colombia: Central Bank hastens loosening cycle in March

At its 22 March meeting, the Board of Directors of the Central Bank of Colombia (BanRep) accelerated the pace of its loosening cycle; it slashed interest rates by 50 basis points, lowering the benchmark interest rate to 12.25%. The decision, which followed January’s 25 basis point reduction, was again not unanimous: One of the seven members preferred a 75 basis point cut, and another a 100 basis point reduction. Markets had largely anticipated the move.

The decision was driven by the continued deceleration of both headline and core inflation through February, which fell to 7.7% and 7.3%, respectively. Similarly, the Bank downwardly revised its inflation expectations and sees inflation receding close to the 3.0% mid-point target—with a plus or minus 1.0 tolerance band—by mid-2025.

Regarding activity, BanRep upwardly revised its 2024 GDP growth forecast to 1.1% from 0.8% in its January meeting.

BanRep’s communiqué was again void of explicit forward guidance, and its tone was unchanged from that of January’s meeting. The Bank noted that the current interest rate level remains consistent with the goal of returning inflation to target.

All of our panelists expect additional rate cuts this year, although the spread remains wide at 150–625 basis points worth of further reductions. The Bank’s next meeting is scheduled for 30 April.

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