Central Bank of the Republic of Colombia Enacts an Eighth 2017 Interest Rate Cut

October 30, 2017

Colombia’s benchmark interest rate was sliced to 5.0% from 5.25%. This was this year’s sixth 25-basis point reduction, and there have been also two cuts of 50 basis points. Prior to these, there was an initial 25-bp cut in mid-December of 2016. The rate had crested at 7.75% from July until December of last year.

A released statement observes that economic growth remains weakish and is expected to average less than 2.0% this year. Although total inflation moved higher in September, the increase was by less than expected, and core inflation continues to ebb. With Colombia’s output gap still swelling, inflation should move closer to the 3% target. While by a 5-2 vote, officials decided to reduce the interest rate benchmark, the statement signals that scope for additional easing is limited and noted that international risks dictate that they proceed with caution from here. “The international environment poses risks that limit the countercyclical capacity of monetary policy in the future. Accordingly, this reduction should not be understood as part of a continuous path of cuts.”

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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