Colombia’s Central Bank says it will be unable to maintain current stimulus

RIO DE JANEIRO, BRAZIL – “We saw the need to start reducing the magnitude of stimulus,” Villar said in a presentation on Thursday, September 9, referring to the body’s last monetary policy meeting in July. “But that does not mean eliminating stimulus altogether.”

Villar said the monetary authority will “gradually” start raising basic interest rates in Colombia, but did not specify when the process will begin.

Analysts heard by the Central Bank expect that the adjustment will occur at the next board meeting, scheduled for September 30. If confirmed, this will be the first interest rate hike in 5 years.

In July, the Colombian Central Bank maintained interest rates at a historic low of 1.75% per year, arguing that price pressures were temporary. Inflation has since accelerated and reached 4.4% in August, above the 3% target.

Colombia is one of the few countries in the region with inflation targets that has not yet begun to withdraw the monetary stimulus implemented to fight the pandemic last year.