Colombia | Banco de la República raised its monetary policy rate by 75 bp to 12.75%

At its January meeting, the Central Bank increased the monetary policy rate by 75 bp, bringing it to 12.75%. The vote was split, with 2 members voting in favor of a 25 bp increase and 5 in favor of 75 bp.

Key points

• Key points:
• Decision: Banco de la República increased its policy rate by 75 bps to 12.75% in a split decision.
• Inflation: The Central Bank highlighted in the press release the inflationary surprise in December in both total and core inflation. With this data, inflation expectations rose significantly. The Governor highlighted that they expect a significant decrease in inflation in 2023, but emphasized that in the first months of the year there will be a singular uncertainty about the behavior of prices.
• Activity: The Bank's Staff reduced the expected growth for 2023 to 0.2% (0.5% previously). However, the Governor emphasized that growth in 2022 was at around 8.0% and on already high levels of activity, so that high levels of activity, despite the slowdown, will allow a relatively satisfactory performance in employment, sales and business results.
• Consumption credit and financial sector: The Governor emphasized that he has already observed, and expects to continue to observe, a moderation in the growth rate of the consumer credit. In this regard, he emphasized that regulation and the increase in interest rates have helped the credit growth cycle to begin to moderate.
• Our vision: The decision to increase the rate by less than that observed in previous months is a sign that the bullish cycle is nearing its end. This message was ratified at the press conference with the manager's answers. Thus, we consider that our view of the end of the hiking cycle in March with an increase of 25bp and a terminal rate of 13.0% is ratified by the information provided at the January meeting.

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