Fedesarrollo assures that interest rates could increase up to 50 points

The total annual variation of the Consumer Price Index (CPI), that is, the cost of living in Colombia, reached 5.62% during 2021, EFE

Next Friday will be held the meeting of the board of directors of the Bank of the Republic in which the new monetary policies will be determined, including the rise in interest rates.

The director of the center for economic studies, Fedesarrollo, Luis Fernando Mejía, assured that an increase of 50 basic points is expected, which means an increase from 3% to 3.5%.

Mejía insisted that the Issuer has to increase interest rates taking into account current inflation, which will continue to increase during the first half of 2022.

The Banco de la República has acted in a timely manner, but of course all market analysts, including the technical team, were surprised by the inflation figure for December 2021. Expectations were at 5.3% and inflation was of 5.62%.

Mejía stated on RCN Radio that Colombians must be prepared for the Banco de la República to rise “at least 50 basis points its intervention rate to leave it at 3.5%, continuing with this normalization cycle, we must not forget that rates are currently at 3% while inflation is at 5.6%, which implies that the rate of real interest I continue being negative”.

Since 2021, inflation has been growing in Colombia and this was revealed on January 5 by Dane. In its most recent study, it showed that the total annual variation of the Consumer Price Index (CPI), that is, the cost of living in Colombia, reached 5.62% during 2021.

This was announced by the director of DANE, Juan Daniel Oviedo, who assured that inflation during 2020, the year in which the greatest restrictions were presented due to the covid-19 health crisis, was 1.61%, which shows considerable growth.

For 2022, the panorama can be much more complex and this is how the president of the Andi, Bruce Mac Master, who insisted that inflation is particular and global and decisions must be made about “how to act”.

FHe was emphatic in saying that the country, in economic matters, must take a good look at which path to take and whether it has enough cost-benefit intervening in interest rates, which would lead to reduced demand at this time.

Finally, he assured that the minimum wage and its increase of 10.07% could be helping to put pressure on inflation, but insisted that the existence of a current deficit should not be lost sight of, which triggers that in pesos the products of the basket familiar are much more expensive.

According to the most recent Fedesarrollo Financial Opinion Survey, in December annual inflation stood at 5.62%, higher than the analysts’ forecast in the last edition (5.29%). In January, analysts consider that inflation will be at 6.17%, so inflation expectations are outside the target range of the Banco de la República (2.0 to 4.0%). On the other hand, analysts forecast that inflation will close at 4.6% at the end of the year, showing an increase in their prediction compared to previous months.


President Iván Duque installed the XVI Summit of the Pacific Alliance
Mábel Lara invites Francia Márquez to the New Liberalism


Leave a Comment