Colombia central bank holds benchmark interest rate at 13.25%
2023.07.31 15:45
© Reuters. FILE PHOTO: General view of Colombia’s central bank in Bogota, Colombia October 9, 2019. REUTERS/Luisa Gonzalez/File Photo
By Nelson Bocanegra and Carlos Vargas
BOGOTA (Reuters) – Colombia’s central bank unanimously held the benchmark interest rate at 13.25% for the second time in a row on Monday, amid slowing inflation which has removed pressure for further hikes but remains too high for borrowing cost cuts.
Inflation remains at high levels compared to the bank’s long-term 3% target, the board said in a statement, and the economic slowdown in the second quarter may have been larger than predicted.
“We expect to continue to monitor the behavior of inflation, given we still have an increase in fuel prices that is still having an effect, and we hope there won’t be any reversal in the inflation rate, so we can consolidate the downward tendency,” said Finance Minister Ricardo Bonilla, who represents the government on the board.
All 26 analysts consulted in a recent Reuters poll expected the bank to hold the rate after 12-month inflation through June slowed to 12.13%, the lowest level since last September.
The bank’s technical team may update its growth and inflation predictions for this year and 2024 in its quarterly monetary policy report this week.
The Colombian peso has strengthened, returning to mid-2022 levels, bank board chief Leonardo Villar said, reading the statement.
“The appreciation of the peso has occurred in the context of a reduction in country risk premiums,” he said.
Most analysts expect the board will start cutting the rate in September or October to avoid a greater impact on growth.
The bank’s technical team currently predicts growth could slow to 1% this year, far below 7.3% expansion in 2022.
The board hiked its benchmark rate by 1,150 basis points between September 2021 and this April, mirroring positions taken by monetary policy authorities around the world, to try to contain inflationary pressures.
The board will reduce the rate to 11.75% by the end of this year, before lowering it further to 7.25% at the end of 2024, those polled by Reuters have said.
