Banco de la República raised its monetary policy rate to 10.0%. With a 6 to 1 split vote

At its September meeting, Banco de la República increased the monetary policy rate by 100 basis points, bringing it to 10.0%, in line with BBVA Research's expectations. The decision was split, with one vote in favor of a 50 bp increase.

Key points

• Key points:
• Regarding inflation, it was noted that medium-term expectations increased, while the effects of the fuel increment decreed would be relatively limited. In addition, it was noted that there are no expectations of changes to the inflation target.
• In terms of activity, the press release states that it continues to grow at a good pace, but short-term information points to a moderation in activity.
• Regarding the external sector, it should be noted that the more contractionary monetary policy in developed countries will affect international financial conditions and those faced by Colombia, which will lead to a depreciation of the peso as well as other currencies.
• In view of the high level of credit and the risks that this may imply, the central bank explained that Superfinanciera is working to moderate the dynamics of consumer credit granting.
• We believe that the Bank is nearing the end of its rate hike cycle and that the lower growth expected in 2023 and the beginning of the decline in inflation play an important role in the decision. In this sense, the central bank could bring the interest rate to a level close to 11.0% this year and keep it stable for most of 2023.

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