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The Banco de la República reduced its intervention rate in the market by half a percentage point (0.5 points) this Thursday, leaving it at 3.25 percent, in a decision that was taken unanimously and that seeks to continue the momentum countercyclical monetary policy, amid the harsh difficulties the economy is experiencing due to the coronavirus pandemic.
Likewise, the entity made decisions in order to ensure the internal and external payments of the economy, among which the inclusion of the National Development Finance Company stands out. and securitization companies so that they can act as placement agents for open market operations (Omas).
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Likewise, it was decided to make the operation of the temporary liquidity support with the Banco de la República more flexible, increasing the amount of exchange coverage by conducting a new auction for the sale of dollars through forward operations (futures) with financial compliance of up to $ 1 billion.
Likewise, it was decided to renew the financially compliant forwards that expire before May 30, 2020, as well as continue to carry out the sale of spot dollars for up to 400 million dollars.
The Issuer’s manager, Juan José Echavarría, assured that the immediate effect of the measures will be seen in the liquidity conditions of the economy, and that the current situation does not give to foresee that there will be an immediate impact on the consumption of Colombians, since that household spending has been restricted by quarantine.
And he added that it is not possible to foresee what will happen with the direction of the rates, that is to say that if there will be new cuts, due to the uncertainty in the market.
Echavarría pointed out that although some rate reductions have been noted in commercial credit, the volatility has led to consumption rates having risen, but he hoped that competition will lead the financial sector to reduce its interest in free investment loans and Credit cards.
In this sense, the Bancolombia Group’s Economic Research team expressed the opinion that after the decision, the monetary authority brought the magnitude of the cuts closer to that registered in other geographies.
“In any case, the board was emphatic that, although the country has a greater margin of maneuver, the uncertain context and the unprecedented source of shock make movements in the rate slow and subject to new information. available, ”they added in an analysis of the decision.
In this regard, the firm Credicorp Capital indicated that due to the Issuer’s position, it expects the market intervention rate to reach the range of between 2.50 and 2.25 percent in the fourth quarter of 2020, after a trajectory of moderate reductions in the coming months.
And although according to the Banco de la República’s calendar and policy framework there are generally no rate decisions at the May meetings, Echavarría did acknowledge that the board could still vote for movements in the reference rate if deemed necessary, taking into account analysis counts to economic variables.
He added that although some rate reductions have been noted in commercial credit by the financial sector, the volatility has led to an increase in consumption rates, but he trusted that competition will lead the financial sector to reduce its interests in free investment loans and credit cards.
In this sense, the manager of the Issuer ruled out that measures will be taken to force the financial sector to lower its rates of credits to the public.
ECONOMY AND BUSINESS – THE TIME
