Policy Interest Rate in Colombia
Throughout 2013-2022, Colombia's central bank adjusted policy rates in response to economic fluctuations and inflation. In the early years, rates were increased to control inflation and stabilize the peso. However, in response to the 2020 pandemic, rates were significantly reduced to historic lows to support economic growth. By 2022, with economic recovery underway and inflationary pressures mounting, the central bank began increasing rates.
The policy interest rate ended 2022 at 12.00%, up from the 3.00% end-2021 value and significantly up from the reading of 3.25% a decade earlier. For reference, the average policy rate in Latin America was 18.90% at end-2022. For more interest rate information, visit our dedicated page.
Colombia Interest Rate Chart
Colombia Interest Rate Data
2019 | 2020 | 2021 | 2022 | 2023 | |
---|---|---|---|---|---|
Policy Interest Rate (%, eop) | 4.25 | 1.75 | 3.00 | 12.00 | 13.00 |
90-day DTF (%, eop) | 4.48 | 1.89 | 3.21 | 13.70 | 12.69 |
10-Year Bond Yield (%, eop) | 6.42 | 5.76 | 8.46 | 13.23 | 9.94 |
Central Bank continues monetary easing in September
Cut meets market expectations, follows a more divided vote: At its meeting on 30 September, the Board of Directors of the Central Bank of Colombia (Banrep) decided to reduce the policy interest rate by 50 basis points to 10.25%. The move, which mirrored July’s same-sized cut, had been largely priced in by markets and was once again not unanimous; three of the Board’s seven members preferred a 75 basis point cut.
Banrep aims to support the economy: Banrep’s decision was targeted at supporting the ongoing recovery in economic activity: Despite high GDP growth in Q2, the Bank noted that fixed investment remained low by pre-pandemic standards. A continued decrease in inflation also gave the Bank room to cut: Price pressures fell to 6.1% in August, undershooting market expectations. That said, persistent upside inflationary risks and sticky inflation expectations likely dissuaded a larger-sized cut.
More cuts likely by year-end: In its communiqué, Banrep provided no explicit forward guidance but underlined its commitment to “support a recovery of economic growth while maintaining the necessary prudence in light of persistent risks to the inflation outlook”; the Bank’s main priority is to drive inflation towards its 3.0% target by 2025. Our Consensus is for around 150 basis points of further cuts by year-end, though the spread remains large at 75–225 basis points. The Bank’s next meeting is scheduled for 31 October.
Panelist insight: Analysts at Itaú Unibanco commented: “The less contractionary global financial conditions, along with the expectation that the effect on inflation of the transporters' strike will be mild, supporting a further fall in inflation and CPI expectations, we believe that the Board may be more willing to move to a larger cut at the October meeting. We see a year-end rate of 8.75%. Nevertheless, domestic fiscal risk may see a cautious approach prevail.” Scotiabank Colpatria analysts were slightly more dovish: “We revise our call for future interest rate moves, to a 50 bps rate cut in October, and a potential acceleration since December with a cut of 75 bps to close the year at a 9% rate, […] we think that waiting further to start to reduce the real rate could have a negative cost in the economic activity in the future. We still estimate the terminal rate to be around 5.50%, and it could be achieved in H2-2025.”
How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Colombian interest rate projections for the next ten years from a panel of 35 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable interest rate forecast available for Colombian interest rate.
Download one of our sample reports to visualize what a Consensus Forecast is and see our Colombian interest rate projections.
Want to get access to the full dataset of Colombian interest rate forecasts? Send an email to info@focus-economics.com.
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