The Bank of the Republic scales interest rates up to 13% in Colombia

The Central Bank of Colombia raises its interest rates from 12.75% to 13%, as announced on Thursday by the Bank's manager, Leonardo Villar.

This rate is the one with which the Bank lends money to other financial entities and, therefore, impacts the cost of borrowing in Colombia.

The board of directors of the Banco de la República met the expectations of most analysts, who expected it to continue raising the rate, but more slowly than in past months, a sign that it plans to stop the increases.

If between August and December 2022 the rate was 100 basis points at each meeting of the Board, in January the rise was 75 and this month it was only 25.

The Finance Minister, José Antonio Ocampo, was present at the announcement, made before the media and financial analysts.

Villar assured that they made the decision taking into account the most recent inflation data, which shows that up to February the cost of living in the country has increased by 13.28%.

It is a figure almost five times higher than what – for the entity's experts – is good for the economy, the inflation target towards which their interest rate decisions point: 3%.

To the extent that inflation shows no sign of abating, neither will rate hikes.

In the press conference that followed the announcement, the minister reiterated his view that inflation is going to start to drop.

“The ceiling, in my opinion, has already been reached.

There are different opinions on the board but we hope that even in March the reduction will start, ”he explained.

He maintains that this is what data shows, such as the increasingly slower rate of increase in the Producer Price Index (inflation when buying inputs, which usually produces effects a few months later on consumer inflation).

The person in charge of the economic portfolio also referred to the poor state of the economy at this time, also giving signs of hope.

“Demand has slowed down sharply, and it is reflected in vehicle or housing sales data.

We hope that's hitting the bottom in terms of the slowdown in the economy.

And that at the same time that inflation falls, an economic reactivation is allowed, ”he said.

Manager Villar explained that beyond these forecasts, the board has not defined what will happen at its next meeting, on April 28: "We cannot decide if we have already reached the maximum amount of the rate," he said.

He clarified that at each meeting they review data on economic activity, inflation or the exchange rate, and that they will only make the decision based on the most up-to-date information they have for that date.

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