[ad_1]
Seven years ago the Banco de la República did not place interest rates at 3.25%, a figure in which it left them after yesterday’s meeting. To reach this new figure, the Issuer’s board of directors cut rates by 50 basis points (bp), from 3.75%, in line with what market analysts expected.
(Read: Banco de la República lowers its interest rate once again)
In the midst of the situation facing the country, with this measure, the Central Bank seeks to continue giving continuity to the countercyclical drive of monetary policy.
(Read: Four measures that Banco de la República could study due to the crisis)
In addition to the reduction of the reference rates, the Issuer announced other measures that it took in order to ensure the internal and external payments of the economy. Among these, it was reported that the National Development Finance Company and the securitization companies were included so that they can act as placement agents for open market operations (Omas).
He also said that the operation of temporary liquidity support with Banco de la República will be made more flexible. As a third measure, it announced that it will increase the amount of foreign exchange coverage by conducting a new sale of dollars through forward (future) operations with financial compliance for a value of up to US $ 1 billion.
Between the last two decisions, it announced that it will renew the financially compliant forwards that expire before May 30, 2020 and that it will continue to carry out auctions for the sale of dollars for up to US $ 400 million.
On the other hand, it is worth mentioning that Juan José Echavarría, manager of Banco de la República, said that it is not ruled out that measures can continue to be taken regarding interest rates in future meetings.
Regarding why in yesterday’s meeting it was not decided to cut rates beyond 50 bp, the Manager explained that they have been skeptical of the effects of a large reduction in interest rates in a single meeting, partly because people It is still locked up and the economy is still stopped.
Echavarría added that for them it does not make much sense “to drop 100 points in this meeting and another 100 in the other. We think it is better to go little by little to avoid capital shocks that can greatly affect the economy. ”
In addition to this, he recalled that the reduction of the rates are key for the moment of the economic recovery.
It is worth mentioning that beyond the reductions that the Issuer has been making, which in its last two meetings has lowered them 100 basis points, market analysts expect that during the course of the year the rates will reach a range between 2% and 2.5%, thus touching its historical lows.
INTERNATIONAL PANORAMA
Since the coronavirus pandemic began to spread to all regions of the world, central banks in different latitudes have been making decisions regarding their interest rates.
One of the most striking was the one carried out by the United States Federal Reserve, which cut its benchmark on two occasions outside its monetary policy meeting. The first reduction was 50 basis points, while in the second it cut one percentage point to the current range between 0% and 0.25%. It is worth saying that the Issuer stated this week that it will not move its intervention data until the country’s economy grows again.
Similarly, the European Central Bank this week also kept its benchmark at 0%, while its deposit ease rates remain at -0.5%. The Bank of England, likewise, has made two declines during the coronavirus emergency to reach 0.1% today.
Latin America has been no stranger to this trend. The Central Bank of Chile has carried out two downgrades since the pandemic began, one from 100 basis points to 1% and the last from 50 bp to 0.5% today.
For its part, the Mexican issuer fell 50 bp in its last meeting to 6%, while experts already anticipate that the Brazilian monetary body could cut 100 bp in its next meeting in May, to 2.75%.
