Latin American banks define monetary policy based on environment

The Central Bank of Brazil – Latin America’s largest economy – kept its benchmark interest rate unchanged at 10.5 percent on Wednesday, opting for “caution” in the face of an “uncertain” international scenario and projections of rising inflation in the country, which in June stood at 4.23 percent.

The announcement, widely anticipated by the financial market, is bad news for President Luiz Inácio Lula da Silva, who since coming to power in 2023 has pushed for an accelerated drop in rates to boost economic growth.

The Monetary Policy Committee (Copom) made the decision unanimously, due to the “uncertain global scenario and the domestic scenario marked by resilient activity, rising inflation projections and unanchored expectations,” the organization said in a statement.

For its part, the Central Bank of Colombia carried out its sixth interest rate cut since the current downward cycle began in December 2023.

With the new half-point cut, the rate was placed at 10.75 percent, and a cumulative decrease of two and a half points was achieved.

The latest decision was supported by five of the bank’s seven board members, while two voted for a three-quarter point cut.

In addition, the technical team of the Colombian Central Bank revised its forecast for the country’s economic growth for this year to 1.8 percent from a previous estimate of 1.4 percent.

In Chile, the Central Bank decided to maintain the interest rate at 5.75 percent, in a unanimous decision in line with operators’ expectations.

The decision marked the first time the bank has left rates unchanged since the start of the easing cycle, during which it has made eight consecutive rate cuts of the equivalent of five and a half points from a high of 11.25 percent.

According to the bank, the decision to leave rates unchanged is in line with the bank’s strategy, which consists of continuing to cut rates, but taking into account inflation and the macroeconomic scenario.