Colombia | Banco de la Republica reduced its policy rate by 50 bp to 11.25%

Summary

Banrep's Board maintained the pace of rate cuts of the last meetings, with a 50bp reduction in June, accumulating a total of 200bp since it began its downward rate cycle in December 2023. The decision was split, with 4 members in favor of the 50bp reduction, two members in favor of a 75bp reduction.

Key points

• Key points:
• Banrep's Board statement highlights that total inflation remained stable but that core inflation (excluding food and regulated items) decreased from 6.4% to 6.1% in May.
• On the activity front, the press release highlighted that the first quarter result of 0.9% annual GDP growth was higher than the Staff estimate (0.3%).
• On the external front, it was noted that the risk premium and the exchange rate deteriorated in recent weeks, mainly due to external factors.
• Regarding the interest rate, both the Governor and the Minister emphasized that there is a consensus in the Board on the need to reduce the interest rate.
• During the press conference, the Minister was asked about Moody's recent decision to ratify the rating and revise the outlook to negative from stable. Regarding this, the Minister emphasized that the news, more than the outlook revision, is that Moody's ratified Colombia's investment grade rating.

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