The Colombian peso was the standout performer among global currencies in June, appreciating 7.4% on the month even as the US dollar broadened its strength and oil prices dropped sharply. According to the Monthly FX Market Report published by the research arm of Bancolombia (NYSE: CIB, BVC: BCOLOMBIA), the peso closed the month at 3,415.25 per dollar, a gain of 274 pesos over the period. The report was prepared by the Economic, Industry and Market Research Area of Grupo Cibest, the financial holding group that owns Bancolombia.

The move ran against the grain of the month’s external drivers. The dollar index (DXY) strengthened 2.3% and Brent crude fell 20.7%, a combination that would ordinarily weigh on a commodity-linked emerging-market currency. Instead, the peso rose on domestic factors tied to Colombia’s presidential election, tracking a rally in local assets that priced in a higher probability of a market-friendly outcome.

The election set the tone

The peso’s appreciation was in line with the rally in local assets that followed the first round of the presidential election, which raised the perceived odds of a right-wing candidate’s victory, the report said. That pattern — commonly observed across the region — limited any upside for the dollar after the second round. Abelardo de la Espriella was elected to govern for the 2026–2030 term, winning 49.63% of the vote, or 12,960,166 ballots, in the tightest race since 1994. Iván Cepeda secured 48.67%, or 12,708,312 votes, and conceded after the official tally was released.

Overseas voting favored de la Espriella, at 64%, the report noted, while domestically he drew strong support in central regions, including Norte de Santander at 76%, Casanare at 69%, Santander at 65%, Antioquia at 64% and Huila at 61%. Voter turnout reached a historic high of 26.3 million participants, or 63.6% of the electorate, with blank votes marginal at 1.6%.

Markets reacted positively to the shift in the government’s political spectrum. JP Morgan recommended maintaining long positions in TES, Colombia’s peso-denominated treasury bonds, according to the report; the bank also held a neutral stance on the peso and closed its short positions against the Brazilian real and the Mexican peso. Through the month the dollar traded between 3,385 and 3,613 pesos, with average intraday volatility of 44 pesos.

“The Colombian peso appreciated in June on idiosyncratic factors, defying the global backdrop.” – Economic, Industry and Market Research Area, Grupo Cibest (Bancolombia), Monthly FX Market Report, June 2026

The central bank resumes its hiking cycle

Following a pause in April, the Banco de la República, Colombia’s central bank, resumed its tightening cycle and, by majority decision, raised its policy rate by 75 basis points to 12%. The report characterized the decision as reinforcing a more restrictive stance amid persistent inflationary pressures, in an environment where tensions between the bank and the Executive appeared to have eased. That rate level, it said, is supportive of long peso positions.

Major central banks abroad kept a cautious posture. The Federal Reserve unanimously held its policy rate in the 3.50% to 3.75% range and revised its expected rate path higher, with the median projection for 2026 pointing to a 25-basis-point increase. The European Central Bank raised its policy rate by 25 basis points to 2.25%, a level not seen since April 2025, while the Bank of Japan lifted its rate by 25 basis points to 1.0%, its highest since 1995.

Defying the global backdrop

The peso appreciated on idiosyncratic factors even as the broader environment turned less favorable, the report said. Markets closely tracked the Middle East conflict, where the US and Iran reportedly reached a peace memorandum that included the reopening of the Strait of Hormuz, the lifting of the US blockade on Iranian ports, the release of frozen Iranian assets and a 60-day window to discuss Iran’s nuclear program. In that context Brent prices fell 20.7%, closing at $72.97 USD per barrel, while WTI settled at $69.60 USD, down 20.3% on the month. The report cautioned that the normalization of trade flows would be gradual, citing reported Israeli attacks and episodes of tension between the US and Iran that leave a definitive peace uncertain. Gold prices fell 11.8%, closing at $4,023 USD per ounce, on shifting rate expectations and reduced demand for dollar-denominated safe-haven assets.

The dollar index, meanwhile, strengthened 2.3%, driven by expectations of higher-for-longer US interest rates. Even so, the peso outpaced its regional and developed-market peers by a wide margin. Among the currencies that gained against the dollar in June, the Swedish krona rose 5.2%, the Chilean peso 3.7%, the Swiss franc 3.5%, the Canadian dollar 2.9%, the Brazilian real 2.6%, the Japanese yen 2.1% and the euro 2.1%, while the Mexican peso and the Peruvian sol added 0.9% and 0.5%, respectively. The Colombian peso’s 7.4% advance left the field behind.

The month ahead

The research team expects the dollar to trade within a range of 3,440 to 3,580 pesos in July, against a backdrop of elevated global uncertainty. Markets are likely to maintain a constructive bias following the change in government, the report said, though cabinet appointments and signals on fiscal consolidation from the incoming administration will be key to sustaining the trend.

The bank framed the risks in two directions. Upside risks for the dollar remain linked to the deterioration of public finances: the Ministry of Finance has explicitly highlighted the need to strengthen fiscal revenues through an adjustment of around 1.6% of GDP, a scenario the report said would be necessary to stabilize net debt below 60% of GDP over the next decade. Colombia’s fiscal trajectory has already drawn scrutiny from ratings agencies, with S&P Global Ratings cutting the country to BB- earlier this year on fiscal concerns. Downside risks for the dollar, by contrast, persist in connection with carry-trade strategies, particularly as the central bank resumes its rate-hiking cycle and widens the rate differential that rewards holders of peso assets.

The Monthly FX Market Report was prepared by the Economic, Industry and Market Research Area of Grupo Cibest, with contributions from International FX and Rates Analyst Maria Paula Gonzalez, Chief Economist Laura Clavijo and Macroeconomic Research Manager Jose Luis Mojica, drawing on data from SetFx, LSEG Workspace, the Banco de la República, the Departamento Administrativo Nacional de Estadística (National Administrative Department of Statistics) and JP Morgan.

Colombia’s Finance Minister Germán Ávila abandoned a meeting of the board of the central bank (Banco de la República), on April 1 in protest over two decisions by the institution: the release of an internal document without prior consultation, and a 100-basis-point increase in the benchmark interest rate, which was raised to 11.25%.

According to the finance minister, the disclosure of the document, which involved both institutions and was linked to a draft government decree, constituted an “abuse.”

He also described the rate hike, the second so far this year, as “irresponsible and inconvenient,” arguing that it contradicts the government’s economic growth strategy.

The central bank said the decision was approved by a majority of its board: “four members voted in favor of the increase, two supported a 50-basis-point cut, and one proposed keeping the rate unchanged.”

The bank justified the move by noting that inflation stood at 5.4% in January and 5.3% in February, above the 5.1% recorded at the end of 2025. It also warned of external risks, including the impact of the conflict in Iran on the global economy, which could increase the cost of key imports such as gas and fertilizers and add to inflationary pressures later this year.

It remains unclear whether Ávila’s withdrawal from the board will be temporary or permanent, but the episode marks a new point of institutional tension that could influence the direction of monetary policy in Colombia in the coming months.

Clash between monetary policy and government strategy

Ávila criticized the decision, saying the central bank is overlooking the country’s economic progress. “The decision taken by the central bank is repetitive and continues to ignore the national government’s efforts to ensure fiscal stability and sustained economic growth,” he said.

He also argued that the increase is disproportionate compared with global trends. “There is not a single economy in the world proposing a 200-basis-point increase in the benchmark rate in the current global context,” he said, referring to the fact that the bank had already raised rates by 100 basis points in February, meaning a total increase of 200 basis points in just four months.

The government maintains that macroeconomic conditions remain stable, pointing to controlled inflation, a relatively stable Colombian peso (COP) against the dollar, declining unemployment and solid productive growth, and argues that tighter monetary policy is unnecessary.

Debate over central bank independence

The Finance Ministry said the minister’s decision to leave the meeting does not seek to challenge the independence of the central bank, but rather to highlight the need for its decisions to align with the country’s economic and social reality.

However, the move has raised legal and institutional concerns. Central bank chairman of the board, Leonardo Villar noted that the finance minister has a constitutional obligation to attend board meetings, as he “not only represents the government but also lead the meetings” said in a public interview broadcasted by media outlet like La República.

He warned that an indefinite absence could amount to a breach of legal duties and urged President Gustavo Petro to appoint an “ad hoc” delegate if the minister decides not to attend future meetings.

Experts say the minister’s absence could affect the board’s ability to make decisions. According to Andrés Pardo, former deputy finance minister and head of Latin America macro strategy at XP Investments, in an interview with Valora Analitik, “current regulations require at least five members, including the finance minister or a delegate, for the board to deliberate and decide”.

This could mean that, without his presence, the central bank may be legally unable to adopt monetary policy decisions.

Economic impact

The rate increase could have significant effects on the real economy. According to the Finance Ministry, a move of this magnitude could slow economic recovery, increase borrowing costs for households and businesses, and raise debt servicing costs.

Small and medium-sized companies, construction, retail and tourism are expected to be among the most affected sectors, along with households holding variable-rate loans.

Lower-income groups could face the greatest impact, as reduced purchasing power and tighter access to credit may deepen economic inequality.

Here’s a summary of some of the key areas.

GDP Growth

Colombian GDP for 2023 saw the outlook rise from 1.1% to 1.5%, moving closer to the estimates of overseas agencies. Once again — despite opinion polls declaring we are heading for Armageddon — we see various stakeholders increasing the GDP outlook while there was also a jump in consumer confidence last week. For 2024, which will depend greatly on the actual 2023 results, there was a small reduction in the GDP estimate, falling from 2.3% to 2.2%.

Inflation

CPI estimates for 2023 rose from 9.15% to 9.22%. For the 12-month forecast, it is expected to fall to 6.82%. All eyes will be on the June reading from DANE in a couple of weeks.

Interest Rates

There has been a slight cooling on the outlook for the overnight rate for year-end of 2023, from 12.0% to 11.75%, with a 12-month outlook of 9.5%. For this month, the Colombian central bank will leave rates at their 13.25% peak.

Colombian Peso

There has been a dramatic revaluation of the currency recently and that is reflected in the latest analyst estimates. The new year-end 2023 consensus is 4,300 pesos to the US dollar versus 4,600 a month ago. In reality the peso never deserved to be at 4,500+ level, so this is a welcome, more-rational view.

Equities

There is a renewed sense of positivity around the COLCAP, with 81.5% believing the market will rise over the next three months versus 69.2% a month ago. In terms of sectors, holdings companies are the preferred choice, in particular Grupo Argos. In terms of other names, ISA Interconexión Eléctrica and Nutresa, despite the uncertainty over the new Gilinski leadership, are also in demand.

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A calm has descended on Colombia which is perhaps best reflected in the Peso which has gained 7%, to $4761 since hitting a low of $5120 on November 4 – critics will simply say it’s a reflection of the global move against the dollar and there is a modicum of truth in that however, that is to ignore an 18% decline in Brent Oil prices over the same period – a move which would normally impact negatively on the Peso.

Petro’s first months may have been turbulent however Finance Minister Ocampo has done good work in the co-pilot seat in order to calm the nerves on issues such as the tax reform, capital controls and the oil sector – of course if President Petro was a touch less active on Twitter, such firefighting could have been avoided.

Ocampo yesterday gave his economic outlook for 2023. GDP is expected to rise 1.3% which is in-line with many analyst’s expectations – it may not be the ~8% of 2022 but it will still represent outperformance in the region. Inflation is predicted to come into 7.2% with a fiscal deficit of 3.8%. In order to control that deficit fuel subsidies will continue to be removed, with repayments made to Ecopetrol, all way overdue. Also 18.5% less local debt (US$5.62bn) will be issued in 2023 – all sensible stuff.

Rupert’s opinions & analysis as an independent expert contributor are his own and not necessarily those of Finance Colombia or the BVC.

Ocampo added that inflation should have slowed in December (we will find out January 5) and this will allow the central bank to cease the tightening cycle.

The government, meanwhile, is working right hard to control the impact of the 16% minimum wage hike. They have prepared a 47-page document that will look to limit at 60 items from the 204 products that increase prices automatically by the same 16%. They would increase by the ~12.5% FY inflation instead. The government is also looking at limiting other products outside of this list in order to increase the purchasing power of those receiving the 16%. Again, a simply logical move in the fight against inflation.

This week we had the economic activity reading from the DANE for October (4.6%) which was up from and adjusted 4.4% last month but below estimates of 4.8% and well below the 10% recorded 12 months ago – another indicator to add to those over the last couple of weeks pointing to a noticeable Q4 slowdown. Wherever you look at the moment, be it construction, retail sales or energy demand – the clues are there that the economy is slowly but surely rolling over.

Import data for the same month whilst robust (US$6.1bn) and above expectations, also pointed to the same slowdown. Most sectors were down YoY however a few areas such as petroleum and vehicles gave a healthy appearance to the headline figure but underneath things have plateaued somewhat.

That is about it for this week – wishing all of you a very peaceful holiday weekend, however you celebrate it.

Please find below the LinkedIn video report:

https://www.linkedin.com/posts/rupert-stebbings-927b6316a_colombia-economy-activity-7011958656007045120-X4ob?utm_source=share&utm_medium=member_desktop

That is about it for today – remember these are just themes that jump out at me – please refer to your local analyst, economist, salesperson or soothsayer for more details.

My regards to all,

Roops

After years of elevated results, inflation fell within that range at the beginning of 2018 and remained at or below 3.2% for a six-month stretch throughout the middle of 2018. The year-over-year rate has begun to creep back up, however, reaching 3.33% in October, the highest figure since January.

As inflation began to fall back closer to 3% in the first half of the year, the Bogotá-based Banco de la República seemingly ended an interest rate-cutting cycle that took the nation’s key interest rate down from a high of 7.75% in November 2016 to its current 4.25%.

The most recent cut, of 25 basis points, came in May and the central bank committee members have not made any intervention in subsequent meetings over the past six months.

“Monetary policy actions taken so far are compatible with the process of convergence of inflation to its 3.0% target, and aim at achieving this target in coordination with the general economic policy,” said Banco de la República in a statement this week.

It added that the “board will continue to carefully monitor the behavior of inflation and the forecasts for inflation and economic activity in the country, as well as the international context.”

In mid-November, the Banco de la República forecasted inflation to end 2018 at 3.3%. It also expects 3.3% inflation for 2019, while noting global economic risks and exchange-rate factors that could alter that prediction.

Another economic factor that could alter the trajectory of inflation is the proposed tax cuts by Colombian President Iván Duque. While the has altered its proposal, which is ultimately up to Congress to finalize, early versions of his plan to raise more revenue for the government included value-added tax increases and other provisions that some analysts said could lead to large jumps in inflation.

Despite the jump, the rate remains largely in line with expectations set by the Colombian central bank, the Banco de la República, which has forecast the 2018 inflation rate to end the year at 3.28%.

“A slight increase in inflation due to supply factors is expected for the end of 2018 within a more dynamic economic growth environment than in the previous year and which would continue in 2019,” said the bank in a statement after leaving the nation’s benchmark interest rate unchanged, at 4.25%, last week.

During October, the cost of housing (up 0.36%) and transportation (0.20%) were the largest factors in the overall CPI increase. Healthcare (0.07%) and clothing (0.06%) also contributed to the uptick.

Food prices, an areas that has drawn increased attention since President Iván Duque submitted a tax bill that included a value-added tax on some basic foods, actually fell by 0.04% in October. This included price drops for tomatoes (-12.9%) and oranges (-5.7%). Onions (up 13.6%), potatoes (7.5%) and yuca (5.8%) all increased in price last month.

Price drops were also seen in October in the cost of communications (-0.05%) and entertainment (-0.08%), a category that has now fallen by 2.8% during the first 10 months of 2018.

The year-over-year inflation rate in August came in at 3.1%, the lowest figure in years and just a tick above the midpoint within Banco de la República’s target range of 2%-4%. This marked the sixth straight month that annual inflation was below 3.2%.

The central bank’s analysts expect a slight rise in the next three months, but they still expect inflation to conclude the year at 3.2%. This will remain relatively stable through the end of next year, landing at 3.3% in December 2019, per analyst projections.

In terms of growth, “the economic activity indicators available for the third quarter suggest that the economy would have continued growing slowly, albeit somewhat faster than in the first half of the year,” said the bank in a statement.

Banco de la República has continued forecast the Colombian gross domestic product (GDP) to grow by 2.7% for 2018.

“The average growth of the country’s trading partners remains dynamic, driven mainly by the developed economies,” stated Banco de la República. “The international price of oil and the terms of trade continued to increase and continue driving the national income.”

READ MORE: On the Rise – Colombian Economy Grew by 2.8% in Second Quarter

The central bank cut Colombia’s benchmark interest rate by 25 basis points to 4.25% at its April meeting. It has since held the rate steady over the subsequent five months.

Compared to June, the consumer price index fell by 0.13% — significantly below the consensus forecast. Bancolombia (NYSE: CIB), the Medellín-based largest bank in Colombia, had expected a rise of 0.13%.

“A record similar to this for July hadn’t been seen since 2003,” wrote Bancolombia in its analysis. “Thus, the monthly variation of consumer prices decreased 28 basis points compared to June and 8 basis points contrasted with July 2017.”

Though the year-over-year rate is the lowest since mid-2014, it remains in line with the figures seen in three consecutive months early this year (3.14% in March, 3.13% in April, 3.16% in May) before a minor is rise in June (3.20%).

The year-to-date inflation rate is down even more significantly, sitting at 2.34% from the first of the year through July.

The nation’s central bank, Banco de la República, has set a target range for inflation of between 2%-4%.

Though the rate has remained relatively steady, near the target midpoint of 3% for the past five months, this month’s fall was largely due to food prices, which dropped by a sizable 0.56% from June to July.

Though inflation remains low, Bancolombia is forecasting that this number will continue to creep up throughout the second half of the year to finish 2018 at 3.4%.

Therefore, it does not expect the central bank to increase the nation’s benchmark interest rate in 2018.

“We reiterate our stability forecast for the remainder of the year,” wrote the bank in a note to investors. “We share the view of the central bank that the current interest rate is consistent with the recovery phase of productive activity, the convergence of inflation towards the medium-term target, and an external environment that, although it has favored the reactivation of the economy, will be a source of significant uncertainty for emerging economies going forward. In line with this outlook, we believe the conditions for monetary policy normalization to begin will only be available in the first quarter of 2019.”

The central bank has likely concluded the interest rate cutting cycle that took the benchmark rate in Colombia from 7.75% in late 2016 to the current 4.25%. In its most recent meeting, the board voted unanimously to maintain the current rate.

Outgoing Finance Minister Mauricio Cárdenas was among those who advocated for one final rate cut as a “last effort” to spur a little more economic growth back in April when the figure stood at 4.5%.

READ MORE: Colombian Central Bank Leaves Benchmark Interest Rate Unchanged at 4.25%

The central bank projects 2.7% GDP growth in Colombia this year, but it has exuded more confidence of late that this number can be hit, whereas previously it saw lower growth as a larger risk.

“The co-directors [of the central bank] are more optimistic about this figure, which makes additional cuts in the repo rate less likely since the current position of the rate, which is slightly expansive, would continue contributing in the remainder of the year to closing the output gap,” wrote Bancolombia.

The Banco de la República began its rate-cutting cycle in December 2016 and governor of the bank’s board, Juan José Echavarría, had previously said that committee members believed that “the cycle of rate reductions had been completed” following its move earlier this year to lower the rate to 4.5%.

But inflation continued to drop in the interim — falling to 3.14% in March — while economic recovery remains uncertain given the upcoming presidential election and global factors, such as the sustainability of higher oil prices, volatility in the exchange rate of the peso, and the potential for a trade war between the United States and China to negatively affect markets.

After lowering the rate, the seven-member central bank board cited the “weakness of the economic activity and uncertainty over its pace of recovery” for its anonymous decision to drop the rate from 4.5% to 4.25%.

While highlighting that some recent metrics indicate a reason for optimism for economic recovery this year, meager growth remains the primary concern about the Colombian economy.

READ MORE: Interview – Central Bank Head Juan José Echavarría Speaks on Recovery, Rates, and Blockchain

“The economic activity indicators available so far this year suggest that the economy would have continued with a low growth, albeit higher than in 2017,” stated the board. “With these results, the technical staff of the central bank maintained its growth estimate for 2018 at 2.7% … [and] the preliminary estimate of the technical staff for GDP growth in 2019 is 3.7%.”

The Banco de la República added that it is now expecting the interest rate to end this year 3.37% and fall further to 3.16% by the end of 2019. The central bank’s target range for inflation is between 2%-4%.

Colombia’s central bank Governor Juan José Echavarría speaks with Bonds & Loans about the economy, interest rates, and blockchain in this exclusive interview.

The Colombian economy slowed more than expected in 2017 to growth rates not seen in a decade. What were some of the main drivers in play? And are you seeing more opportunities for a rebound in 2018? What are the biggest economic risks to Colombia in 2018?

“Future decisions on the benchmark interest rate will depend on the analysis of the risk balance between the expected recovery of the economy, along with the high levels of excess capacity, and the pace of convergence of inflation to its target.” – Juan José Echavarría, head of the Banco de la República

The Colombian economy grew 1.8% in 2017, slightly below the growth figure for 2016, or 2.0%. This digit was close to the one forecasted by the central bank’s technical staff months ago, 1.6%, and to the expectations by the majority of market analysts.

The fall in the terms of trade since mid-2014 and the sharp slowdown or even contraction of the country’s main trading partners in the region have been the most important reasons behind the slower growth of the economy in the last few years, including 2017. Additionally, the Colombian economy continued to face some adverse transitory supply shocks.

In 2017, the process of adjustment of expenditure continued after the huge negative shock to national income due to the fall of the international price of oil and other commodities exported by the country. While an increase in the terms of trade was reported in the same year, their levels remained significantly lower than those observed before 2014.

Similarly, the adjustment of both public and private expenditure has taken place gradually in a less favorable external context. However, there has been a significant advance in this process, as suggested by the reduction of the external imbalance.

Juan José Echavarría, governor of the Colombian central bank, Banco de la República. (Credit: Banco de la República)

For 2018, the external and internal conditions are more favorable than in previous years, which allows to trust in an acceleration of growth. In its most recent projection, the technical staff of the central bank forecasts a growth figure of 2.7%, and considers that, within a stable international economic context, it may continue to improve and converge towards potential growth in coming years. On the one hand, the average of international oil prices would increase again compared to the previous year, even after considering any foreseeable correction on its level in the coming months.

“The board considered that by reducing the benchmark interest rate to 4.5%, the cycle of rate reductions initiated in December 2016 had been completed.” – Juan José Echavarría

Additionally, the economies of the region begin to show signs of recovery, and advanced economies are at their best moment in the last ten years, which suggests that sectors such as non-traditional exports and services may gain momentum and help consolidate long-term growth. On the domestic front, the decline of inflation and the expansionary monetary policy should help to stimulate demand in the coming months. In addition, investment in civil works announced by the government will continue to contribute significantly to growth, as happened in 2017.

However, the possibility of a strong decline of oil prices by an excessive supply that may be deemed to be permanent may require greater and more prolonged adjustments in domestic spending besides those already foreseen. Likewise, the decisions on monetary, fiscal and trade policies that are being made in advanced economies must be considered.

Particularly, those related to unforeseen changes in the U.S. Fed’s benchmark interest rate could cause increases in the volatility of financial markets as well as in the risk perception of the economies of the region, increasing the costs of the sources of funding.

Bonds & Loans: Commercial lending looks set to rise by more than triple the rate seen the previous year, according to Asobancaria’s estimates. How do you see this impacting banking sector liquidity and entities’ reliance on the capital markets?

Juan José Echavarría: Given that the observed nominal annual growth rate of the stock of commercial loans in 2017 was 3.3%, Asobancaria’s estimate for 2018, somewhere slightly below 10%, is still relatively low compared to the average of the last five years, 11.7%. As a consequence, an expansion of commercial credit of such magnitude should not have significant effects on the liquidity of banks, considering that the banking sector has enough liquid assets to finance this growth.

This is supported by the analysis (presented in Box 2) of the September 2017 “Financial Stability Report of the Central Bank of Colombia,” where it is shown that banks have enough capital and liquidity to support a greater growth of the total loan portfolio.

Regarding the reliance of financial entities on capital markets, Colombian banks traditionally have shown a relatively low dependence on this type of funding. As such, the impact of higher credit growth on capital markets should be small.

Bonds & Loans: In January the central bank cut its benchmark rate in a narrow decision but called an end to its easing cycle, which lasted over a year, and has held rates steady since. Where do you anticipate rates heading in the medium term given the Bank’s outlook on the economy?

“Cryptocurrencies are not an asset equivalent to legal currency, neither recognized as foreign currency by the exchange rate regime.” – Juan José Echavarría

Juan José Echavarría: The latest press release after the monetary policy meeting of the board of directors of the central bank announced that, facing the macroeconomic scenario under analysis and with the information available at the time, the board considered that by reducing the benchmark interest rate to 4.5%, the cycle of rate reductions initiated in December 2016 had been completed.

Thus, future decisions on the benchmark interest rate will depend on the analysis of the risk balance between the expected recovery of the economy, along with the high levels of excess capacity, and the pace of convergence of inflation to its target. Should this balance not differ much from expectations, the rates would remain at their current level until new information indicates something different.

Bonds & Loans: Blockchain is becoming increasingly popular with banks and financial institutions, not only to support process efficiency but to also bolster transparency and data integrity, helping them meet evolving regulatory requirements. Do you see a role for blockchain among the country’s financial institutions? What is the Colombian central bank doing in this area?

Juan José Echavarría: Cryptocurrencies, or virtual coins, are a digital asset whose value is highly volatile; therefore, it can generate huge profits or losses to its holders. This is why it is important for them to adequately understand the risks they face. Virtual currencies are not backed by physical assets nor by any central bank, so their exchange value could be drastically reduced in a short period of time.

The use of blockchain as a means of payment may generate some kind of disruption in the way financial services are provided. These risks can be heightened given the fragility in the value of cryptocurrencies, which could induce collapses of the prices of these assets.

READ MORE: Colombian Central Bank Projects GDP to Grow by 2.7% in 2018

At the same time, there could be new risks and legal implications should they be allowed to operate together with the rest of the financial system. Particularly, they could induce greater instability in times of financial crisis by facilitating bank runs. Therefore, the regulation should look at competition issues, interoperability with intermediaries, and infrastructure of the financial system.

In Colombia, cryptocurrencies are not recognized as currency, and, therefore, they are not legal tender. Thus, it is not mandatory to receive it as a means to fulfill obligations. In other words, cryptocurrencies are not an asset equivalent to legal currency, neither recognized as foreign currency by the exchange rate regime. Consequently, they cannot be used in foreign exchange operations.