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Bonilla Says Rates Need To Support Growth, Villar Keeps Cautious Tone

COLOMBIA
  • Speaking at a conference earlier, Finance Minister Bonilla continued to strike a dovish tone, noting the need for interest rates to support economic growth. He said that the country will grow at a low rate this year and that it needs to do more to boost growth with investment in housing and civil works. He added that long-term GDP growth is 4% and that this is insufficient for Colombia’s needs. He also said that BanRep needs to continue cutting interest rates, but does not need to reduce rates below inflation.
  • By contrast, Governor Villar, speaking at the same conference, still sounded cautious, noting that policymakers must be careful about a rebound in inflation. Although he expects GDP to be around 1% this year, he said that lowering interest rates is not enough to promote private investment. Villar’s focus still seems to be on inflation, which he says remains too high. He also noted that inflation expectations are far from target, especially those of break-even inflation.
  • The latest Bloomberg Colombia economic survey will be published tomorrow, including forecasts for interest rates. Currently, consensus is for a quarter-end policy rate of 12.25%, implying a 50bp move at the next MPC meeting in March.
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