Colombia Maintains Interest Rate at 13.25%

The board of directors of Central Bank of Colombia convened for a meeting on October 31 and decided to maintain the interest rate at 13.25%. This rate, established in May, has remained unchanged despite persistent appeals from the government and experts. Regardless of the decreasing trend in inflation, the Colombian monetary authority remains resolute in keeping the rate steady, at least until December.

Certain experts suggest that by year-end, the rate could be trimmed to 12.75%, constituting a 50-point reduction. Such a move would alleviate the economic pressures that have gripped the Colombian economy over the past year and a half, a period characterized by the central bank’s determination to maintain high interest rates as a measure to control inflation.

It’s important to note that in the past two months, the business association (Andi) and the national government have jointly urged the central bank to lower interest rates, citing the ongoing economic deceleration. Current growth hovers around zero, and the persistently high interest rate is the primary hurdle to economic recovery.

Economic Tensions

Despite the ongoing discord between the government and the business sector on one side and the monetary authorities on the other, Central Bank of Colombia remains committed to its high-interest rate strategy. This aligns with the policies of central banks in Europe and the United States.

The central bank’s reluctance to lower interest rates is primarily driven by the fight against high inflation, which has placed significant pressure on economic growth. The global economic turbulence began with the 2020 pandemic and was exacerbated by Russia’s incursion into Ukraine and the resulting conflict in that European region.

Currently, the only relief for consumers comes from the reduction in the borrowing rate, which is applied to interest charged on credit card expenses. In November, the borrowing rate will be set at 38.28%, marking the seventh consecutive reduction in a rate that peaked at 47.09% in April.

Nevertheless, the rate still remains significantly higher than the levels of 2021, when it hovered around 25.50% for most of the year.