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By unanimous decision and in response to the need to give a greater boost to the economy in the midst of the crisis, the Board of Directors of Banco de la República reduced its interest rate again from 2.25% to 2%.
The general manager of the Issuer, Juan José Echavarría, explained the aspects that the Issuer took into account to cut interest again through a statement in the following terms:
- Inflation in July was 1.97% and the average of the core inflation indicators at 1.76%.
- The inflation expectations from the surveys at the end of 2021 stand at 2.87% while the two-year expectations obtained from the debt papers stand at 1.56%.
- The growth result in the second quarter confirms a weak aggregate demand and excess production capacity.
- The June data reiterates the deterioration in the labor market and the reduction in labor income.
- Financial market conditions have improved compared to the beginning of the crisis and the high liquidity of international and local markets has translated into lower sovereign risk premiums and adequate access to external financing.
- Additionally, there has been an adjustment in the current account deficit which is expected to continue throughout the year and which reflects lower external financing needs.
In these conditions, the balance of risks in monetary policy suggests the convenience of providing an additional boost to the economy.
The impact of monetary policy will be greater to the extent that the conditions of the pandemic allow the gradual reopening of the different sectors to continue.
