Colombia

Colombia’s central bank ignored complaints from President Gustavo Petro and raised interest rates to the highest level in more than two decades, while also deciding against intervention in the currency market, Bloomberg News reported. The bank lifted its benchmark rate by one percentage point to 11%, after the peso plunged and foreign investors dumped the nation’s bonds. The unanimous decision, which was in line with expectations, extends the steepest series of interest rate increases since the bank started inflation targeting at the end of the 1990s.

Colombia's central bank board will raise the benchmark interest rate at its meeting next week, which is likely its penultimate increase in a cycle meant to counteract inflation, analysts said in a poll on Friday, Reuters reported. Twelve of 14 analysts surveyed said the seven-member board will increase borrowing costs by 100 basis points to 11%, while one analyst predicted a 75 basis point raise and another projected a 50 basis points uptick. If the majority prediction is met, it would be the highest rate since July 2001.

Further increases to Colombia's benchmark interest rate may be necessary in the coming months as the central bank tries to bring inflation in line with its 3% target, according to minutes from the bank's meeting last week, Reuters reported. Colombia's central bank board raised its benchmark interest rate by 100 basis points to 10% last Thursday, as inflation pressures and domestic consumption remain robust and central banks around the world boost rates. The country's 12-month inflation hit 10.84% in August and the market expects the figure to have risen to 11.25% in September.

Bond issuances by companies in Colombia plunged nearly 50% in the first half of the year due to rising financing costs, Fitch Ratings said on Thursday, Reuters reported. "Rising inflation and a revised monetary policy resulted in a large increase in financing costs, conditions that kept companies from issuing new debt," the agency's senior analyst, Juan David Medellin, said in a report. Annual inflation in Colombia is at its highest level since April 2000, according to data published by the National Department of Statistics (DANE), reaching 10.21% in annual terms at the end of July.

Colombia’s central bank delivered its biggest interest rate increase in over two decades, potentially putting itself on a collision course with President-elect Gustavo Petro, though it signaled the pace may not be kept in future decisions, Bloomberg News reported. The board unanimously raised rates by 150 basis points to 7.5%, Governor Leonardo Villar told reporters after a policy meeting Thursday. That’s the largest hike since the bank implemented its inflation-targeting strategy in 1999.

Colombia's fiscal rule committee said on Tuesday the country's finances are still not in order despite upticks in predicted tax revenue, and there is risk of an eventual increase in debt and spending, Reuters reported. The expert Autonomous Fiscal Rule Committee (CARF), charged with evaluating public finances, added in a statement there should be a change in the country's accounting to include fuel subsidy deficit.

Colombia's economy could have grown by 7.5% in the first quarter of 2022 versus the year-earlier period, mainly boosted by domestic consumption, though this will begin to moderate amid inflationary pressures, a Reuters poll revealed on Friday. Estimates from 13 analysts for economic growth fluctuated between 6% and 8.30% in the three months ended March 31. If growth is in line with the poll's median forecast of 7.5%, Latin America's fourth-largest economy will have expanded at a slower rate than in the prior quarter ending Dec. 31, when growth hit 10.8%.

Colombia swapped internal public debt worth 2.6 trillion pesos ($641 million) in April, the second such operation this year and part of an effort to reduce amortizations and improve the country's debt profile, its finance ministry said on Thursday, Reuters reported. In the latest operation, the ministry traded TES securities coming due in 2023 for others tied to inflation which come due in 2035 and 2037 and peso-denominated paper coming due in 2042.

Colombian presidential candidate Federico “Fico” Gutierrez, the main challenger to leftist Gustavo Petro, is planning a tax reform to gradually increase revenue over 10 years, according to one of his top advisers, Bloomberg News reported. That will help fund an ambitious plan to boost growth, tackle infrastructure bottlenecks and build a million homes for low-income families, but without running up unsustainable debts that would scare off investors, said Manuel Fernando Castro, who is helping formulate the candidate’s economic program.