The Economic Cabinet of Honduras is complying at the letter with the recommendations of the International Monetary Fund (IMF) and implementing a series of adjustments to its main policies.
Eight days after having approved the first and second semi-annual review of the 2023-2026 agreement, the board of the Central Bank of Honduras (BCH) authorized on 24 October the highest adjustment in the history of the Monetary Policy Rate (TPM), increasing it by 175 basis points and will therefore go from 4% to 5.75%.
This is provided for in resolution 456-10/2024 issued at session 4116 of 24 October and to which EL HERALDO had access.
The resolution was notified to the national financial system last Thursday through circular D-30/2024; the new TPM will enter into force on Monday, October 28.
Adjusting by one hundred and seventy-five basis points (175 bp) the Monetary Policy Rate (TPM) and as a result set its level at five points seventy-five per cent (57 per cent) per year), reads the five-page resolution.
The above-mentioned resolution also sets the applicable interest rate for the Permanent Credit Facility (FPC) at 6.25% per year, according to the following formula: PET 0.50 points. It also sets the applicable interest rate for Permanent Investment Facilities (IFF) at 5.25% per year, according to the following formula: TPM .0.50 points.
It is the second time in the last three months of this year that the Central Bank of Honduras increases the MPC, since on August 1 it approved an increase of 100 basis points to raise it from 3% to 4%, and in force since August 5.
From 27 November 2020 to 4 August 2024, the Monetary Policy Rate remained at 3%, resulting in stability in active and passive interest rates in the national financial system.
A statistical report by the BCH reveals that the highest adjustments between 28 August 2007 and 5 August 2024 have been 100 basis points, and effective from these dates: 14 May 2012 and 1 August 2024. However, the highest reductions in the MPC have been 125 basis points, such as that recorded on 21 April 2009.
However, a cumulative adjustment 275 basis points is the highest in one year, with the highest figure being in 2007 at 200 points. The last time the Monetary Policy Rate remained at 5.75% was on January 7, 2019, falling to 5.50% from 23 December of that year.
The monetary policy review is part of the agreement signed with the IMF and in force since 1 September 2023. In the press release of 18 October, the technical mission of the Monetary Fund revealed that the authorities indicated that they were prepared to continue adapting these policies, as necessary to ensure the achievement of the objectives of the programme.
The 175 basis point adjustment to the TPM was approved in the midst of the participation of the authorities of the Economic Cabinet, the president of the BCH, Rebeca Santos, and the Secretary of Finance, Cristhian Duarte – in the annual meetings of the IMF held in Washington, United States.
The increase from 4 per cent to 5.75% in the MPC will impact the interest rates of the Honduran financial system, as reflected by the latest 100 basis point adjustment. Between 5 August and 18 October 2024, the active interest rate for loans in the national currency rose from 12.88% to 15.41%, or 2.53% more, while the passive deposits – was increased from 8.80% to 12.91%, with an increase of 4.11%, according to reports of the Central Bank.
This article has been translated after first appearing in El Heraldo