The central bank will likely lower its benchmark interest rate from 13.25% to 13% at the October policy meeting, according to a statement made by Colombia’s Finance Minister Ricardo Bonilla on Saturday. Another drop is anticipated before the year is over.
On the fringes of the World Bank and IMF meetings in Marrakech, Bonilla told Reuters, “The expectation is for another cut in December.”
All banks should take note of the message to lower the key rate, as it now stands in the way of economic recovery,” he continued.
For the third consecutive month, the central bank maintained the benchmark rate at 13.25% in September, citing persistent inflation. According to Bonilla, inflation is expected to hit 9.2% by the end of 2023.
As the government’s representative on the seven-member board, Bonilla has previously advocated for rate reductions.
At the board meeting in September, two members voted in favour of a cut in borrowing costs; however, the bank does not disclose the votes cast by each member. Five members decided to maintain the current 13.25% borrowing charges.
Gustavo Petro, the president of Colombia, expressed dissatisfaction over the September decision and expressed optimism that cuts would occur soon.
September saw a 0.54% increase in consumer prices in Colombia, bringing the country’s 12-month price growth to 10.99%. While that was less than the peak values of 2022, it was still more than twice the long-term 3% target set by the central bank.
The technical committee of the central bank projects that Colombia’s GDP would expand by 0.9% this year, down from 7.3% in 2022.
According to Bonilla, the war between Israel and Hamas “will surely impact in oil prices,” and it may be necessary for the government to raise the price of petrol domestically.
In the first half of 2024, he continued, Congress ought to be able to approve legislation pertaining to labour, pensions, and health reform as part of the government’s initiatives to combat poverty and inequality.