Colombias central bank may need more rate hikes depending on inflation – IMF

Colombia's central bank may need more rate hikes depending on inflation - IMF

BOGOTA (Reuters) – Colombia‘s central bank may need to consider additional hikes to its benchmark interest rate, depending on how inflation in Latin America’s fourth-largest economy behaves, the International Monetary Fund (IMF) said in a statement on Tuesday.

The board of Colombias central bank has raised borrowing costs by a total of 1,100 points to 12.75%, its highest rate since 1999, since launching into an upward monetary cycle in September 2021.

At the same time, inflation climbed to a high of 13.25% in the 12 months through January.

“Additional increases in the monetary policy rate could be necessary depending on the evolution of inflation, inflation expectations, and conditions of demand, among other factors,” the IMF said.

Last week central bank board chief Leonardo Villar warned that inflation in the Andean country had yet to top out, which will likely lead to a more restrictive monetary policy than expected.

That sentiment was echoed by the IMF, which said Colombias central bank will have to maintain a restrictive monetary police until after 2023.

To reduce uncertainty and maintain expectations regarding the central banks credibility, it is crucial that efficient communication be maintained by the bank, the IMF added.

(Reporting by Oliver Griffin; Editing by Alistair Bell)

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