Colombia | BanRep raised its monetary policy rate by 100 bp.

At its January meeting, the Bank of the Republic increased the monetary policy rate by 100 bps, raising it to 4.0%. The vote was split, with 5 members in favor of a 100 bp increase and 2 members in favor of 75 bp.

Key points

• Key points:
• The Board, in a split decision, increased the monetary policy rate by 100 bps, to 4.0% (higher than anticipated by analysts). The decision was split, with 5 members favoring a 100 bp increase and the remaining 2 advocating a 75 bp increase.
• Regarding inflation, the statement highlighted that it closed December at 5.6%, above analysts' and the technical team's expectations. Core inflation averaged 3.5%, exceeding the target, but inflation excluding food and regulated products stood at 2.5%. At the same time, they highlighted an upward revision in total inflation forecasts to 4.3% compared to the 3.7% expected in December.
• Available activity indicators suggest that the economy will continue with a robust recovery, ratifying the growth forecast for 2021, close to 10%. However, the growth outlook for 2022 has been revised to 4.3% compared to the 4.7% previously anticipated.
• At the press conference, the minister highlighted that the fiscal deficit for 2021 closed below the estimates of the medium-term fiscal framework. He added that the behavior of global commodity prices would have a positive effect on the fiscal accounts, especially in 2023, but could contribute to achieve a lower fiscal deficit than anticipated.
• The Minister highlighted that a gradual transmission of the increases made to date by the Bank in market interest rates has been observed. He expects that this behavior will continue to be observed with the adjustments made on this occasion and that the movement will be gradual.

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