2024-10-02 01:32:36
In its most recent session, the Board of Directors of the Banco de la República made the decision to reduce the monetary policy interest rate by 50 basis points (bps), bringing it to 10.25%.
This decision was approved by a majority, with four directors voting in favor of the measure, while three opted for a more aggressive reduction of 75 bps.
Key factors in the decision
In its analysis of monetary policy, the Board evaluated several determining factors. One of the most notable was the behavior of annual inflation, which in August reached 6.1%, a figure lower than expected by the market. This drop in inflation was mainly due to the good performance of the food supply and minor adjustments in some regulated public services. Likewise, basic inflation, which excludes food and regulated items, was reduced to 5.5%.
Another relevant aspect was the stability in future inflation expectations. Measures derived from public debt markets for 2025 showed a reduction in inflation expectations, while analyst estimates remained stable.
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Regarding economic growth, the gross domestic product (GDP) in the second quarter of 2024 registered an annual increase of 1.8% in its seasonally adjusted series. This growth was driven by a more robust than expected domestic demand, particularly thanks to the dynamism of private consumption. Although investment in fixed capital also showed an increase, it still has not reached pre-pandemic levels.
Despite the reduction in interest rates and expectations of additional cuts in the United States by the Federal Reserve, risk premiums in Latin America increased. In the case of Colombia, this increase was more pronounced, influenced by factors such as the drop in oil prices and the fiscal difficulties facing the country.
The Board of Directors highlighted that, although this reduction in the interest rate seeks to continue promoting economic recovery, risks persist regarding the behavior of inflation.. Therefore, they emphasized that future monetary policy decisions will depend on the evolution of economic data and the new information available.
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