Colombia central bank expected to cut rate for second time – Reuters poll

By Nelson Bocanegra

BOGOTA (Reuters) – Colombia’s central bank is forecast to make a second cut to its benchmark interest rate at its meeting next week – taking advantage of breathing space amid slower inflation – a Reuters poll revealed on Friday.

However, analysts were split on the size of a potential cut.

Eleven of the 21 analysts surveyed forecast a 50 basis points cut, which would take the benchmark rate to 12.50%, while the other 10 analysts forecast a reduction of 25 basis points, which would put the rate at 12.75%.

The monetary policy authority began a downward cycle on Dec. 19 with a 25 basis points cut to the interest rate, which took it to 13%.

“The central bank could continue its cuts to the benchmark rate amid recent industry, commerce and construction data, which show a significant slowdown,” said analyst Daniela Guio of investment management firm Fidubogota.

“Likewise, inflation has continued along a negative trend and has generated a stabilization in inflation expectations derived from the public debt market,” Guio added.

While Colombia’s inflation closed 2023 at 9.28%, well above the central bank’s 3% target, the metric registered nine months of deceleration through the end of December.

At the same time, Latin America’s fourth-largest economy contracted by 0.3% in the third quarter of 2023, which pushed the central bank’s technical team to cut its growth forecast for the year to 1%, from a previous 1.2%.

Analysts’ median expectation now sees the central bank’s interest rate closing this year at 8.25%, up from 8% previously in December’s poll. Analysts still forecast the rate to end 2025 at 5.5%.