Central Bank Chief Says Colombia Can’t Maintain Current Stimulus

Colombia’s rapid recovery and growing inflationary pressure mean the central bank will need to pare back the amount of stimulus it’s providing the economy, bank Governor Leonardo Villar said, Bloomberg News reported. “We saw the need to begin reducing the magnitude of stimulus,” Villar said in a presentation Thursday, referring to the central bank board’s discussion in its last policy meeting in July. “That doesn’t mean eliminating stimulus altogether.” The bank will begin to lift interest rates “gradually”, he said, without specifying when it will start. Analysts surveyed by the central bank are forecasting the first rate increase in more than five years when the board meets Sept. 30. Central banks across Latin America are raising interest rates, with every major economy in the region now afflicted by above-target inflation. Chile shocked traders last week with its biggest interest rate rise in two decades, and Brazil, Mexico, and Peru have all increased borrowing costs in recent months. Colombia is the only major inflation-targeting economy in the region that hasn’t yet begun to withdraw the monetary stimulus it deployed after the pandemic hit last year. Villar’s comments signal that it may soon follow suit. Read more.