Banco de la Republica de Colombia cuts benchmark interest rate to 6˝%

By Caroline Salls

Pittsburgh, April 28 – The board of directors of the Banco de la Republica de Colombia decided to reduce its benchmark interest rate by 50 basis points to 6˝%, according to a news release.

The board said annual inflation decreased to 4.69% in March, while the average of the measures of core inflation remained stable at 5.55%. Inflation expectations for December 2017 and 2018 declined to 4.4% and 3.5% respectively, primarily as a result of the behavior of food prices.

In Colombia, the bank said recent indicators of economic activity such as retail sales, industrial production and consumer confidence suggest a more-pronounced weakening of the economy in the first quarter than expected.

As a result, the bank reduced the growth forecast for 2017 to 1.8% from 2%.

According to the release, recent indicators point to a greater risk of increases in the surplus capacity in the economy, although the size of these is uncertain.

In addition, the board said the current level of the real interest rate policy is “contractionary.” This could be exacerbated further with the decline in inflation expectations, the release said.

The decision to reduce the interest rate by 50 bps had the approval of four members of the board. The other two members voted to reduce the rate by 25 bps.

© 2015 Prospect News.
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