A FEW WAYS IN WHICH THE COLOMBIAN ECONOMY COULD REACT

A FEW WAYS IN WHICH THE COLOMBIAN ECONOMY COULD REACT

After the decision of the ECB to lower the interest rate to 0.75%, which is an historic minimum and the intervention of the British Central Bank, how will react the Colombian economy?

There are universal micro and macro economical truths but all the paradigms that until now seemed right are changing in a daily basis and the market challenges anyone who tried to determine its future behavior.

The globalization is making the markets, the countries and the cultures more interconnected than ever, and the same thing happens with the Stock Exchange and the economy of the countries as well as the economies of the economical blocks.

With the decrease in the European interest rate, the analysts are expecting several changes in the Latin American economy. Colombia is not the exception to these rules and is looking how the dynamism of the decisions that is making the European Union could affect the domestic economy.

The question in terms of financial policy is what the Bank of the Republic will do with the interest rate for the rest of the year? Some analysts are saying that the regulator should decrease the interest rate a few months ago due to the deceleration of the economy that we are seeing is going too fast if we compared with the forecasts made by the Financial Minister, the Bank of the Republic and the analysts. Other analysts are saying that if the Bank of the Republic maintains the interest rate this could create a better environment for the FDI to keep coming to invest in the real economy as well as in the Stock Exchange due to better interest rates than the developed countries and also better rates than in the region because Peru has an interest rate of 4.25%, Chile is in 4.50% and only Brazil has a better interest rate but they developed taxes restrictions to that capital. Another analysts are saying that the Bank of the Republic could drop the interest rate before the ending of the year but they should see the environment in which if the economy behaves in a good way should leave the interest rate where it is now, but if the economy continues with its rally of decrease they will have to lower the rate.

Only time will what will be happening with the Colombian economy in the rest of the year and how will react the Bank of the Republic to all these changes in the world, but specially in the region.