Bogotá — In Colombia, interest rates continue to rise, reaching 12% in December, but economists in the country believe that in order to control inflation, the Banco de la República will have to continue making loans more expensive.
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Although since September 2021 the rates in Colombia they have risen more than 900 basic points, inflation in the country accumulates a rise of 12.53% during the last 12 months.
In their analysis to increase interest rates by another 100 points, the co-directors of Banco de la República considered that in November annual inflation maintained a growing trend and was higher than expected, standing at 12.5% of the total and at 8. 8% basic inflation (without food or regulated).
In addition, the statement mentions that inflation expectations continue to be above the target and is emphatic that this happens for all horizons.
During the press conference, the Issuer’s general manager, Leonardo Villar, highlighted the importance to maintain credibility regarding the inflation target in terms of keeping the transmission of devaluation to inflation stable (passthrough).
Villar also mentioned that consumer credit should tend to grow at lower rates, more in line with personal income growth, and that its slight slowdown is already being observed, thanks in part to increases in the policy rate. monetary.
According to BBVA Research, the main concern is inflation, not only due to the November surprise but also ialso due to inflation expectations that are above the target for all horizons.
In this sense, BBVA considers that due to inflation, at least 50 additional basis points of rate increases can be expected at the beginning of 2023, but clarifies that the final magnitude will depend on the behavior of inflation.
Within the diagnosis that the Central Bank showed, is the reading that the Colombian economy can grow this year close to 8%, which is a really high rate when compared with the rest of the region and even with the economies at a global level.
“In particular, this has led to private consumption expanding quite significantly this year, we have seen this reflection, for example, in the growth of the consumer loan portfolio and in this context the bank considers it prudent to continue increasing its interest rate”, says Jackeline Piraján, economist at Scotiabank Colpatria
It also explains that for the economic situation of Colombia this means that “we will continue to see how this increase in interest rates is transmitted to the active rates of the economy both for loans as for deposits, and in this sense the message to consumers continues to be to prefer interest-bearing savings instruments or deposits, instead of acquiring new debts, and the cost of credit is increasing, we see that the usury rate exceeds 40% and the signals from the Banco de la República suggest that we be a little more prudent with those spending decisions”.
On the other hand, the expectation from Scotiabank Economics Colombia is that the Central Bank rate continues to rise, probably in January there will be a new upward movement in the interest rate and there can only be a pause when it finds the peak in inflation, which is expected, to occur towards the month of December.