Colombia Reappoints Central Bank Chief Who Oversaw Record Monetary Tightening

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(Bloomberg) -- Colombia’s central bank board elected Governor Leonardo Villar for a second four-year term, potentially reassuring investors worried about political interference in monetary policy.

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Villar, 65, has repeatedly defied pressure from President Gustavo Petro and the Finance Ministry, who have called for deeper interest rate cuts to revive weak economic growth.

Villar took office in 2021, a few months before inflation began to accelerate sharply in Colombia and across the world, as global demand rebounded before supply chains had fully recovered from the pandemic. To bring consumer price rises back under control, he oversaw the steepest series of interest rate rises in Colombia’s inflation-targeting history, lifting the key rate to 13.25% from 1.75%.

“He has a lot of credibility and transmits calm to the markets,” said Carolina Soto, a former member of the central bank’s board who worked alongside Villar, in a written response to questions.

Since last year, the bank has been easing policy as inflation slows toward its target. But Villar has come under pressure from private bankers and industry lobbyists, as well from the government, to do this much faster.

London School of Economics

Villar was educated at the London School of Economics and also headed Fedesarrollo, a Bogota-based economics think tank.

As a central bank co-director from 1997 to 2009, Villar was on the board when Colombia moved to inflation-targeting and a floating exchange rate. He also helped co-ordinate the response to the financial crisis which hit at the end of the 1990s, the worst in Colombia’s recent history, when real estate prices crashed.

Under Colombian law, neither congress nor the presidency have any say over the governor’s appointment. However, Petro will name new two co-directors by February, making some investors nervous that this might change the course of monetary policy.

--With assistance from Oscar Medina.

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