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Colombia Monetary Policy April 2024

Colombia: Central Bank cuts rates again in April

At its meeting on 30 April, the Board of Directors of the Central Bank of Colombia (Banrep) decided to cut the benchmark policy interest rate by 50 basis points to 11.75%. The decision, which mirrored March’s same-sized cut, was once again not unanimous: One of the seven members preferred a 75 basis point cut, and another a 100 basis point reduction. The move had been largely priced in by markets.

The decision was motivated by a continued reduction in both headline and core inflation, which fell to 7.4% and 6.8% in March, respectively. In particular, the Bank noted receding price pressures for goods and food.

Regarding activity, Banrep increased its economic growth projection for 2024 to 1.4% from 1.1% and forecast a 3.2% expansion in 2025, which gave the Bank further room to continue its monetary policy loosening cycle. Meanwhile, the Bank noted a slight increase in the seasonally adjusted unemployment rate in February.

In it communique, the Central Bank reaffirmed its commitment to cut rates to boost growth ahead. In line with this, all of our panelists expect additional rate cuts by year-end, although the spread remains wide at 100–575 basis points worth of further reductions by year-end. The Bank’s next meeting is scheduled for 28 June.

Goldman Sachs’ Santiago Tellez spoke about the outlook for rates ahead:

“We view the overall tone of the minutes and the updated staff’s forecasts in the April QIR as consistent with the continuation of the cautious cutting cycle. Our baseline scenario remains that the MPC will deliver 50bp rate cuts in upcoming meetings.”

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