The Bank of the Republic decided to raise 100 basis points interest rates, which came to 5 %.
The announcement was made this Thursday, March 31, 2022, and the determination was made with the intention of controlling inflation, which by February of this year exceeded 8%, although the issuer acknowledges that Colombia living a good economic dynamism.
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Asked about how it will be guaranteed that the rate of growth does not collapse with the rise in rates, the Minister of Finance, Jose Manuel Restrepo He explained that the most important thing is to protect the purchasing power of Colombians.
“The process of economic normalization is underway, the interest is to avoid difficulties due to price increases and lower purchasing power among citizens. The rise in rates continues to be prone to the recovery of the country and the decision is to protect the purchasing power of citizens and guarantee real and sufficient income that contributes to a good behavior of the demand for it“, argument.
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Although some analysts expected the rate hike to be 150 basis points, Restrepo said the decision to raise 100 basis points is significant. It is worth remembering that rates were at 4%, after the January hike.
“The decision is prudent to control the increase in price expectations, but also to avoid going against the grain in terms of growth and job creation”, he assured.
The Minhacienda stated that the current food inflation that the country is experiencing corresponds to an international event: the result of problems in logistics chains, a faster demand than supply and the result of the conflict between Russia and Ukraine. And that Measurement results take time.
(See: Colombia seeks alternatives to imports from Russia).
“A good part of the reasons why the decision to raise rates is adopted is due to concern about rising price expectations. And these types of decisions have impacts within two or three months. Starting in May there would be a price reduction and, at that time, the real effects would be seen”, he asserted.
Leonardo Villar (right), general manager of Banrep, and José Manuel Restrepo, Minister of Finance.
Bank of the Republic
Finally, Restrepo said that the decree that reduced more than 150 tariff items, some to 0%, will be joined by another with 36 more tariff headings, “with the aim of reducing costs. And this will also have results in two or three months”.
(See: The Bank of the Republic increased interest rates to 5%).
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