Colombia | BanRep lowers rates through the staris, market rates take the lift

Summary

When the central bank initiates a rate reduction cycle, all eyes are focused on commercial banks and how market rates adjust. So far, market rates have fallen significantly more than those of the BanRep.

Key points

• Key points:
• BanRep lowers rates, but market rates fall sooner and faster.
• In addition to the BanRep cycle, factors such as the country risk and regulatory changes have influenced market rates, both in the hiking and reducing cycles
• Declining inflation may allow BanRep to accelerate rate cuts
• The anticipated and more rapid reduction in market rates defies historical experience, in which market rates follow the movement of the BanRep.

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