Colombia | BanRep cut its policy rate by 25bp to 12.75%.

At its January meeting, the BanRep reduced its monetary policy rate by 25bp to 12.75% in a split decision with a 5-2 balance.

Key points

Key points:
It is noteworthy that all Board members voted in favor of reducing the rate, the vote was split, with 5 members in favor of the 25bp reduction and 2 members in favor of a 50bp reduction. The magnitude of the rate cut was within the range expected by analysts.
Inflation closed 2023 at 9.28%, in line with the technical team's forecasts. They also highlight that the measures of inflation expectations have been reduced, about 50bp for the one-year term and 20bp for the two-year term.
The Board mentions some risks to inflation. In particular, a higher than anticipated increase in the minimum wage in 2024; risks associated with the "el niño" phenomenon; and adjustments in prices of regulated products and services.
Although the Board maintains a rate reduction stance, the speed is perceived to be slow. We expect that the Bank will continue to reduce rates, possibly increasing the size of the reductions once inflation risks are mitigated and weak economic performance continues to be observed.