The Bank of the Republic announced a consecutive 25 basis point cut in interest rates, from 13% to 12.75%. This decline, which is a result of the downward behavior of inflation, would have received five votes in favor and two votes against, because the board of directors of the issuing entity expected a decline as high as 50 percentage points .
This was echoed by Finance Minister Ricardo Bonilla, who said issuers would have to make bigger cuts in the next meetings, as the portfolio chief had planned a cut of at least 50 basis points. However, after this adjustment, interest rates returned to the levels recorded a year earlier.
According to BBVA chief economist Alejandro Reyes Gonzalez, “The Board has maintained a timid stance on the size of rate cuts, although it highlighted that there is unanimity regarding the need to reduce them. Despite this, in our opinion, the pace is slow and does not match the behavior of inflation on margins or activity.
When will interest rates fall again?
This figure is linked to the inflation rate in the country, so Leonardo Villar, manager of the Bank of the Republic, assured that he does not know how long the cut phase will last. However, according to analysts’ estimates, the adjustment in interest rates will be more significant in March, falling to 11.5% from 12% in April. At the end of October, in fact, rates could be at 9 percentage points, unless there is a major change in the inflation data.
At the moment, it is expected that the economy can be reactivated at the national level with a reduction in rates, as the high cost of credit will choke off a portion of the country’s financial flows. In fact, this is the reason why the issuing entity did not cut further, because the members of the board of directors were afraid of stopping the cutting process in a short time.