• Aggressive policy response to inflationary pressures warranted by underlying strength of the economy.

The Board of Colombia’s central bank (BanRep) increased the monetary policy rate by 150 bps to 7.50% (chart 1), as expected by market consensus and Scotiabank Economics. Today’s decision came in a unanimous vote as the Board agreed on the strong performance of economic activity and persistent upside pressures on inflation. The GDP growth forecast was raised again, this time from 5.0% to 6.3%. The Board also affirmed that stronger action will accelerate the convergence of inflation to target.

Key features of the decision include:

  • As the first unanimous vote in the current cycle, the decision shows that the doves on the Board now agree on the strength of the economy and that controlling inflation is the priority. It also signals that the end of the hiking cycle is less clear now. In fact, in the press conference, Governor Villar said that is better not to anticipate the end of the cycle, but instead continue with a data-dependent approach.
  • The Board announced a new upside revision in the GDP growth forecast from 5% to 6.3%. In the communiqué, the Board highlighted that consumer credit is expanding at a strong pace (above 22%), while other coincident indicators point to a stronger-than-expected economic performance.
  • Additionally, the Board is vigilant with respect to the current account deficit as it is also pointing to an excess of the domestic demand over productive capacity. In the same vein, financing continues to tighten.
  • In the press conference, Governor Villar highlighted that the current inflation shock is imparting a stronger-than-expected persistence. The indexation effect will impact in 2023, making the convergence to the target slower than usual.
  • Governor Villar also indicated that the central bank is not considering FX intervention, and prefers that the USD COP to fluctuate according to market forces.

BanRep acted as expected with a 150 bps hike. The unanimous vote shows that the end of the hiking cycle is still not defined and that the Board will continue with a data-dependent approach. It will be key to follow consumer credit expansion to assess in future BanRep moves, while inflation risk remains a key variable to expect higher rates for longer. We will revise our expectation of the terminal rate, which is currently calculated at 8.50%. Ahead of the July meeting it will be relevant to follow the update in projections from the central bank staff to anticipate a potential end of the hiking cycle.


This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor any of its officers, directors, partners, employees or affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.

These reports are provided to you for informational purposes only. This report is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any financial instrument, nor shall this report be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The information contained in this report is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a “call to action” or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. Scotiabank may engage in transactions in a manner inconsistent with the views discussed this report and may have positions, or be in the process of acquiring or disposing of positions, referred to in this report.

Scotiabank, its affiliates and any of their respective officers, directors and employees may from time to time take positions in currencies, act as managers, co-managers or underwriters of a public offering or act as principals or agents, deal in, own or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to securities or related derivatives. As a result of these actions, Scotiabank may receive remuneration. All Scotiabank products and services are subject to the terms of applicable agreements and local regulations. Officers, directors and employees of Scotiabank and its affiliates may serve as directors of corporations.

Any securities discussed in this report may not be suitable for all investors. Scotiabank recommends that investors independently evaluate any issuer and security discussed in this report, and consult with any advisors they deem necessary prior to making any investment.

This report and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced without the prior express written consent of Scotiabank.

™ Trademark of The Bank of Nova Scotia. Used under license, where applicable.

Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including; Scotiabank Europe plc; Scotiabank (Ireland) Designated Activity Company; Scotiabank Inverlat S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Casa de Bolsa, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Derivados S.A. de C.V. – all members of the Scotiabank group and authorized users of the Scotiabank mark. The Bank of Nova Scotia is incorporated in Canada with limited liability and is authorised and regulated by the Office of the Superintendent of Financial Institutions Canada. The Bank of Nova Scotia is authorized by the UK Prudential Regulation Authority and is subject to regulation by the UK Financial Conduct Authority and limited regulation by the UK Prudential Regulation Authority. Details about the extent of The Bank of Nova Scotia's regulation by the UK Prudential Regulation Authority are available from us on request. Scotiabank Europe plc is authorized by the UK Prudential Regulation Authority and regulated by the UK Financial Conduct Authority and the UK Prudential Regulation Authority.

Scotiabank Inverlat, S.A., Scotia Inverlat Casa de Bolsa, S.A. de C.V, Grupo Financiero Scotiabank Inverlat, and Scotia Inverlat Derivados, S.A. de C.V., are each authorized and regulated by the Mexican financial authorities.

Not all products and services are offered in all jurisdictions. Services described are available in jurisdictions where permitted by law.