Colombia Accelerates Interest Rate Cuts in a Split Decision
(Bloomberg) -- Colombia doubled the pace of interest rate cuts to revive the weak economy, but two central bankers called for even faster easing.
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The bank lowered its benchmark interest rate by half a percentage point to 12.25%, Governor Leonardo Villar told reporters in Bogota on Friday. Five of the seven-member board voted for the move; one argued for a reduction of three quarters of a percentage point, while another called for a full percentage point.
“The board’s decision accelerates the rhythm of interest rate reductions, while also maintaining a monetary policy stance in line with the goal of getting inflation to its target by mid-2025,” the bank said in its statement.
The move was forecast by by 26 of 30 economists surveyed by Bloomberg, while one expected a smaller cut, and three a deeper reduction.
Colombia has the highest key rate among Latin America’s major inflation-targeting economies, even after cuts in December, January and March. President Gustavo Petro and Finance Minister Ricardo Bonilla have repeatedly called for faster monetary easing to revive the sluggish economy.
The bank revised its year-end inflation forecast to 5.4%, from 5.9%. Villar said the bank will continue to ease policy.
Speaking alongside the governor, Bonilla said that real, or inflation-adjusted interest rates, remain too high.
Mexico finally started to cut rates on Thursday, joining Brazil, Chile and Peru as price rises cool across the region.
In Colombia, inflation slowed for an eleventh straight month to 7.7% in February, after the impact on food and energy from the El Niño weather phenomenon was milder than many economists had feared.
The economy expanded 0.6% last year, its weakest growth this century, excluding the pandemic. Retail sales contracted 3.9% in January, while consumer confidence and industrial output also shrank, likely indicating another difficult year.
The board holds its next monetary policy meeting on April 30.
(Adds Villar comment in sixth paragraph.)
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