The Bank of the Republic of Colombia has made the decision to reduce the interest rate from 12.75% to 12.25%, marking a milestone in its monetary policy. This movement, announced during a press conference, represents a difference of 50 basis points and consolidates a downward trend in the price of money, which reached its peak in June of last year with 13.25%.
The acceleration in the reduction of rates contrasts with the previous decisions of the board of directors, which had established decreases of only 25 basis points in the last two meetings. However, the vote was not unanimous, as two of the Bank’s seven directors expressed dissent in considering that the reduction should be even more aggressive: one advocated a drop of 75 basis points, while another proposed a decrease of 100.
The justification behind this measure is based on more encouraging economic indicators compared to previous months. Leonardo Villar, manager of the Bank of the Republic, pointed out that inflation projections for the end of the year have been revised downwards, going from 5.9% to 5.4%. Likewise, economic growth calculations for this year have seen an improvement, rising from 0.8% to 1.1%. Villar stated that this decision seeks to accelerate the reduction of the interest rate while maintaining a coherent policy stance with the objective of bringing inflation to its goal of 3% by mid-2025.
Despite the 50 basis point decrease in the real interest rate compared to the previous month, which now stands at 4.5%, a considerable gap still remains compared to the ideal target of 2.4%.
This measure comes in a context in which interest rates, used by the Bank to lend money to other financial entities, experienced a significant increase in response to inflation, which reached a maximum of 13.34% in March of last year. . Although this policy sought to moderate consumer demand and encourage savings, it has contributed to an economic slowdown and made it difficult to pay debts, especially for the most vulnerable households.
The criticism of the president of Colombia, Gustavo Petro, towards high interest rates has been recurrent. Petro has argued that reducing rates is essential to stimulate consumption and revive the economy, highlighting the importance of incentivizing key sectors such as housing, clothing and footwear.
The Bank of the Republic’s decision to reduce the interest rate reflects an attempt to find a balance between the need to control inflation and the drive necessary to stimulate economic growth in Colombia. In this sense, the monetary policies adopted have a significant impact on the economic future of the country and the lives of its citizens.
2024-03-22 22:06:50