Concerning the Transmission of the Increases in the Interest Rate of the Central Bank to other Rates

The central bank interest rate was at the level of 1.75% since september 2.020 due to the implementation of an expansive monetary policy in the midst of an economic recession due to the pandemic and remained there until october 2.021 when it was increased to 2%, it was already another time, the year of economic rebound and subsequently continued to rise due to the growth of inflation and by march of present year it registered 12.75%. The differential between the march 2.023 rate and the september 2.020 rate is 11 basis points over a period of two and a half years.

According to private associations of the banks, this increase has been transmitted with different lag terms measured in months towards the other bank interest rates such as those of the CDT and those of the credits.

In effect, the private banks association affirms that the CDT at 180 and 360 days have risen in the same period of time 11.9 and 10.8 basic points and the rates of consumer credits 14.18 and commercial credits 14.5 basic points. The greatest increases belong to credit cards with 19.3 basic points, but the smallest increases are observed in microcredit 9 and housing 9 basic points.

As can be seen, the transmission of the increases in the interest rate from the central bank has been less than 100% in some credits such as microcredit and housing, but in other credits it has been 129%, 132% and 175% such as consumer, commercial and credit cards. In the case of CDTs, transmission has been 108% and 105%. In other words, it is transmitted in a greater proportion to credits than to public deposits and, as shown below, has a greater impact on commercial and consumer credits.

According to information from the entity in charge of supervising the financial system, of the total loans in the financial system, consumer loans are 32%, commercial loans are 50%, while housing loans are 16% and microcredit 0.3%. . Credit cards are part of the consumer portfolio group, but they are only 20% of it. Therefore, since commercial and consumer loans are 82% of total loans and at the same time have the highest increases in interest rates, they also confirm a main source of profits for financial entities.

For their part, CDTs have lower increases in interest, which is expressed in a lower transmission of increases in the central bank rate than that of the credits mentioned above, which widens the so called intermediation margin in banking activity.

Additionally, the decrease accepted by the banks in the interest rates of credit cards will have a lesser impact on the profits of the banks since, as was mentioned, their credits represent a low participation within the total portfolio.

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Today (wenesday 10) as for the world markets, the Stock Markets fall due to uncertainty about the next meeting of the FED and its interest rate movement given that inflation fell to 4.9% in april according to today's report , but underlying inflation rose to 5.5%, which is what this entity centrally observes.

The price of oil falls also influenced by the possible increases in the FED rate and by the latest report of an increase in crude oil inventories in the United States. WTI and BRENT reach 72.8 and 76.7 dollars per barrel.

In Colombia, the Stock Market falls slightly compared to the previous day and the peso closes the day at 4.545 pesos per dollar, slightly higher than the TRM for today of 4.540.