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Colombia cenbank seen cutting rates by 25 bp as inflation falls
March 24, 2017 / 1:00 PM / 9 months ago

Colombia cenbank seen cutting rates by 25 bp as inflation falls

BOGOTA, March 24 (Reuters) - Colombia’s central bank is likely to cut the key interest rate a quarter point for a second consecutive month at its meeting on Friday as policymakers seek to bolster economic growth as inflation expectations fall.

The board, which this month will comprise six instead of the usual seven members, will likely reduce borrowing costs to 7 percent, meeting expectations of 13 out of 14 analysts in a Reuters survey last week. One of those polled expects a half point reduction.

It would be the third rate cut since the bank started a trimming cycle in December.

Policymakers hope the rate cuts will help the economy pick up speed amid weak production and consumption figures in Latin America’s fourth-largest economy.

“The recent pulse of the economy shows a dangerous cooling that requires support from the central bank to recover,” said Wilson Tovar, head economist of the Acciones y Valores brokerage. “It’s necessary to up the pace, knowing that the effects of monetary policy implemented today will appear in four to eight quarters.”

Board members have enough space to relax their position, analysts said, given the significant easing of inflation.

Despite the decrease, consumer price expectations are still above the long-term target of 2 percent to 4 percent, and a decision to lower the rate is unlikely to be unanimous.

Consumer prices rose 1.01 percent in February, taking cumulative 12-month price growth to 5.18 percent.

Last week, the International Monetary Fund revised down its growth projection for the Andean country to 2.3 percent from 2.6 percent, and below the government’s 2.5 percent target.

Only six out of the usual seven policymakers will attend Friday’s meeting, as new board member Jose Antonio Ocampo has not yet officially taken up his post. (Reporting by Nelson Bocanegra; Writing by Julia Symmes Cobb; Editing by Bernard Orr)

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