Colombia cuts rate 7th time in 2020 by narrow majority
“The Board of Directors of the Banco de la República, with a vote of 4 to 3, reduced its interest rate by a quarter of a percentage point, taking it to 1.75%
This decision took into consideration the following elements:
- Inflation in August was 1.88% and inflation excluding food and regulated items at 1.57%. The inflation expectations from the surveys at the end of 2021 stand at 2.75%, while the two-year expectations obtained from debt papers stand at 2.05%.
- In response to the relaxation of the isolation measures, a slower rate of deterioration in economic activity is observed, although economic activity continues to contract. Along these lines, the technical team of Banco de la República estimates that the economy will contract between 6% and 10% in 2020.
- Although the July data reflect a slight improvement in the national unemployment rate (19.8%), they show a marked deterioration in the labor market and in household disposable income.
- Most of the interest rates in the financial system have included significantly the reduction in the monetary policy rate, in a context in which there are increases in the volumes of commercial and consumer credit.
- External financial conditions continue to be favorable and the dynamics of the current account reflects lower external financing needs.
Under these conditions, the balance of risks of the monetary policy suggests the convenience of reducing the interest rate.
The decision to reduce the interest rate by a quarter of a percentage point was approved by 4 members of the Board. The remaining members voted to leave the rate unchanged.”
Source: http://www.centralbanknews.info/2020/09/colombia-cuts-rate-7th-time-in-2020-by.html
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