The good, the bad and the ugly of the rate hike

The good, the bad and the ugly of the rate hike

If you are wondering how the increase in the intervention rate of the Bank of the Republic It is imperative that you know that this measure is intended to curb the rise in inflation, which is already well ahead of analysts’ forecasts and stands at 8.01% per annum as of February.

Inflation also exceeds the inflation target set by the Issuer of 3%, which is why the board of directors has increased the interest rate as part of its monetary policy.

When the Bank changes interest rates, it sets in motion a series of forces that, with some delay, interest rates of the market under different conditions, the exchange rate and inflation expectations, variables which in turn have an effect on the cost of credit, spending decisions, production and employment of agents, exchange rate and price of assets and inflation.

In this order of ideas, both the increases approved by Banrepública’s board of directors, bringing the rate to 5%, and the increases expected in the coming months, are the solution the inflation return to acceptable levels.

Source: El heraldo

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