The manager of the Central Bank of Colombia, defended the institution’s autonomy in response to repeated criticism from the country’s president, Gustavo Petro, over its decision to keep interest rates stable.
The institution defended its actions and reaffirmed that its decisions are not influenced by government directives. It also emphasized that although some members of the board of directors are appointed by the executive branch, none of them act in obedience to government mandates.
Central Bank of Colombia upholds autonomy amid government criticism
The Central Bank’s manager, Leonardo Villar, voiced support for the institution’s board of directors and certain members who have faced attacks for maintaining unchanged interest rates.
“I firmly stand behind a board that operates with the technical mandate to safeguard purchasing power and coordinate with broader economic policy,” Villar stated during his address at an event in Cartagena.
“I served as a board member for 12 years and have now been general manager for four years. The goal has always been to ensure the stability of the currency,” he added.
Villar also noted that Colombia’s Constitution establishes in Article 372 that “board members must represent exclusively the interests of the Nation,” stressing that none of the directors—except for the Minister of Finance—represent a specific administration or opposition political parties.
Rationale for high interest rates
The central bank manager also sought to explain why the institution raised interest rates nearly four years ago and why, despite cumulative reductions in 2024, rates remain at 9.5%.
Villar clarified that this situation—which has made access to credit more difficult for businesses and consumers—stemmed from the inflationary shock between 2021 and 2022. However, he argued that the board’s response resulted in milder effects than initially projected.
He also asserted that the adjustment process has been successful and that positive economic recovery is underway.
Finally, Villar stated that current high interest rates reflect the slower pace of inflation reduction in Colombia compared to other countries.
The disagreements over the pace of interest rate cuts between the government and the central bank are not new in Colombia. President Petro has spent months calling for steeper reductions, arguing that keeping rates high is stifling the country’s economic growth.
In this context, Gustavo Petro once again expressed his dissatisfaction this week with the Central Bank’s decision to leave rates unchanged, calling the move “objectionable” and suggesting the board of directors aims to suppress the nation’s economic growth.
Finance Minister Germán Avila also voiced his disagreement, advocating for a 50-basis-point cut to stimulate the economy. However, the Bank’s board, in a 4-3 vote, opted to maintain the rate, citing concerns about inflation and the country’s fiscal situation.