The Board of Directors of the
has decided to raise the benchmark interest rate by 50 bps to 5.0%, thus continuing to normalize its monetary policy stance.
This decision takes into account the following developments:
i. Year-on-year inflation increased from 6.82% in March to 7.96% in April, above the target range, due to the upsurge of significant increases in international food and fuel prices. Year-on-year core inflation also rose from 3.46% in March to 3.81% in April, above the upper limit of the inflation target range.
ii. The significant increase in international energy and food prices since the second half of last year, recently accentuated by international conflicts, has led to sharp increases in global inflation rates in magnitudes not seen in many years both in advanced and other economies in the region. Thus, inflation is expected to return to the target range between the second and the third quarter of next year.
iii. The downward path of year-on-year inflation would begin in next July, as transitory pressures (exchange rate and international fuel and grain prices) begin to recede, with the economic activity still below its potential level.
iv. One-year-ahead expected inflation increased from 4.39% to 4.62%, between March and April, above the upper limit of the inflation target range.
v. Indicators of expectations for economic activity deteriorated in April.
vi. Global economic activity is improving, although at a slower pace due to the persistent bottlenecks in the global supply of goods and services, the reversal of monetary stimulus in advanced economies, the confinement measures in China and international conflicts.
The Board is particularly attentive to new information on inflation and its determinants, including the evolution of inflation expectations and economic activity, with an aim to consider changes in the monetary stance so that inflation returns to the target range over the forecast horizon.
The Board also decided the following interest rates on its window facility operations in domestic currency with financial entities:
i. Overnight deposits: 3.25% per year.
ii. Direct security/currency repo and rediscount operations:
a) 5.50% per year for the first 10 operations in the last 3 months that a financial institution carries out since March 11, 2022.
b) The interest rate set by the Monetary and Exchange Operations Committee for operations in addition to these 10 operations in the last 3 months.
In addition, the Monetary and Exchange Operations Committee may establish higher rates based on the amount of the operations.
The BCR Board's next monetary policy session will take place on June 9, 2022.