2024-03-14 19:57:46
With the recent decrease in inflation in February, standing at 7.74% according to Dane, expectations about a cut in interest rates by the Bank of the Republic have gained strength, generating speculation about the degree of adjustment that could be implemented at the next Board of Directors meeting.
Finance Minister Bonilla has reiterated his call to accelerate the reduction of interest rates as a crucial measure to contribute to economic recovery. “If we want to contribute to the recovery of the economy, it is absolutely essential to lower the intervention rate to a relatively important figure,” said Bonilla after learning the inflation data.
Corficolombiana Economic Research, in a recent report, suggests that the conditions are in place for the Bank of the Republic to increase the pace of interest rate cuts at the next meeting. The uncertainty lies in the magnitude of the adjustment, raising the possibility of cuts of 50 or 75 basis points.
A reduction of 50 points could be interpreted as a sign of caution, considering the signs of persistence in core inflation and the risks associated with the CPI for food and regulated goods, influenced by possible effects of the El Niño phenomenon.
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Instead, a 75-point cut could reflect that the Board’s future decisions will place greater importance on deteriorating economic activity, especially after the 2023 GDP data.
Germán Machado, a professor at the University of Los Andes, agrees with this perspective, highlighting that, with the current rate at 12.75%, approximately 500 basis points above inflation, the real rate is very contractionary, slowing down credit like economic activity.
However, Julio Romero, chief economist of Corficolombiana Economic Research, points out that a cut of 100 points, as proposed by Bonilla, would be complex and could compromise the credibility of the Bank of the Republic. The final decision remains in the hands of the Board of Directors, which must carefully evaluate economic conditions and the need to promote recovery without putting financial stability at risk.
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