Three weeks ago, and in a joint statement, the Government, Asobancaria, and Andi put the Bank of the Republic between a rock and a hard place before the next monetary policy decision on September 29. They demand that the Issuer devise a way to reduce the interest rate.
But the truth is that the real interest rate of the Bank of the Republic is one of the lowest in the region, at 1.63%. This rate is calculated with a formula that discounts inflation (11.43% annually in August) from the nominal interest rate (13.25%).
Colombia followed Peru (1.82%), Chile (3.99%), Paraguay (4.96%), Ecuador (5.58%), Uruguay (5.67%) and Mexico (6.32%).) and Brazil (7.78%).
“The real interest rate in Colombia is one of the lowest in Latin America and reflects the fact of high inflation in Colombia due to the increase in the price of fuel, to the indexation that the service component has, especially,” said Julio Romero, chief economist of Corficolombiana.
For Felipe Campos, investment and strategy manager of Alianza Valores, this low real interest rate shows that “the weight created in the economy with rates of 13.25% is not such a strong shock, because inflation is higher than others. countries in the region. In real terms, we have slowed down the economy much less than in the region with higher inflation the Bank has changed more in the inflationary dynamic, trusting that it in the long run does not want to harm the economy. So, any criticism that the Bank is out of date is meaningless, if anything the opposite is true, it is waging a moderate fight.
The expert added that another reason why historically the Issue does not need to raise rates is that there is credibility. “There is a certain confidence in the economic environment that, for example, This is not the case in Mexico or Brazil, where they are forced to raise rates even more in the face of inflation. This is an element of credibility that will move forward. ”
However, future expectations are not the same. Romero explained that another analysis that can be done is to calculate the real inflation ex-ante, which does not use the inflation that has already been observed, but expectations for the next 12 months. In this scenario, Romero pointed out, Colombia has a real ex-ante interest rate that is the second highest among the five countries in the region, including Brazil, Mexico, Chile, and Peru. “One-year expectations are declining in the region,” said the expert. Meanwhile, in Colombia, they are at 6%.