The Board of Directors of Banco de la República at today’s meeting decided to maintain the benchmark interest rate at 7.75%.
The Board of Directors of Banco de la República at today’s meeting decided to maintain the benchmark interest rate at 7.75%. For this decision, the Board mainly took into account the following aspects:
In all, the Colombian economy continues to adjust to the strong shocks received since 2014, and the current account deficit is narrowing gradually. The dynamism of output has been weaker than projected, inflation has lowered, but inflation expectations exceed the target. The effects of the transitory supply shocks that have affected inflation and inflation expectations have begun to reverse, and this trend is expected to continue. In this context, the monetary policy actions undertaken so far contribute to the convergence of inflation to its target.
In this environment, after assessing the risk balance for inflation and growth, the Board of Directors deemed appropriate to maintain the benchmark interest rate unaltered. New data on the behavior of prices and aggregate demand will provide more information about the speed of the expected convergence of inflation to the target, and the intensity, nature, and persistence of the economic slowdown.
The Board considers that, given the negative effects of the fall in oil prices on public finances, the structural tax reform bill presented by the Government to the Congress is a crucial action that contributes to long-term growth, to strengthen fiscal sustainability, to maintain macroeconomic stability, and to preserve the credit rating.
The Board will continue to monitor the adjustment of expenditures and its consistency with the long-term income level, the sustainability of the external deficit, and, in general, the macroeconomic stability. Also, it reaffirms its commitment to maintain inflation and its expectations anchored to the target, acknowledging that there has been a transitory increase in inflation.
The decision to maintain the benchmark interest rate unaltered was reached unanimously.