MNI INTERVIEW: Post-Election BanRep Hike A Possibility-Steiner

The Central Bank of Colombia could resume its hiking cycle soon after the presidential election, though the magnitude of any rate increases remains uncertain and will depend on incoming data, former BanRep director and board member Roberto Steiner told MNI.

"The June meeting will take place once the electoral process is concluded. I imagine that the decision at that time will be based exclusively on technical factors, based on the new information available. I do not rule out a further increase in the interest rate," he said in an interview, adding that the size of any new hike and how far rates could go would depend on "new information."

BanRep kept interest rates unchanged at 11.25% last month in a unanimous decision, following several split meetings. The decision surprised the market, which had expected another rate hike. Previously, the central bank had delivered two 100-basis-point increases, with two members voting for a 50-basis-point cut and one for a 25-basis-point cut.

At the March meeting, Finance Minister German Avila walked out and said he would not attend the following meeting in protest against the tightening cycle, but he ultimately returned and voted in the latest decision. (See MNI POLICY: BCB Works On Moves To Boost Policy Transmission)

SPLIT DECISIONS

"In March, the policy rate was increased by 100bp, the same increase as in January. In both cases, it was a split decision. I believe this should be interpreted as strong credibility of the bank in adopting the necessary monetary policy to bring inflation to the 3% target," Steiner said.

The former official, who served as a board member until last year, said that the government's pressure on the central bank is unacceptable.

"It is not unusual that, on the eve of an election, the central bank prefers not to change the interest rate. If it cuts it, it is accused of favoring the government. If it raises it, it is accused of favoring the opposition," he said.

"On this occasion, unfortunately, this occurred in the context of ill-timed threats from the government. The finance minister threatened not to attend the board meeting, preventing it from taking place. The president also threatened to decree an additional increase in the minimum wage if the board had approved a rate hike," he added.

PRESIDENTIAL ELECTION

Colombia will go to the polls on May 31 to elect the president who will succeed Gustavo Petro.

"The election result does not have an immediate effect on the composition of the central bank's board. I think that, if the left wins, it is reasonable to expect that from January 2029 the board will have a fairly heterodox majority."

If that happens, he noted, markets would likely anticipate the implications for monetary policy priorities.

"If any other candidate wins, I imagine that in 2029 the current majority on the central bank board would be consolidated," he said.

On the war in Iran, Steiner said the immediate impact comes through oil prices. "An increase is positive for public finances and strengthens the currency. On the other hand, it pushes up fuel prices. At this stage, I do not think the net effect is very large."