Colombia cuts rate 4th time in 2020 to boost economy

     Colombia’s central bank lowered its policy interest rate for the fourth time this year, as expected, as it continues the countercyclical momentum of monetary policy to boost the economy amid what it said was a persistent uncertainty about the outlook for the global economy.
     The Central Bank of Colombia cut its main interest rate by another 25 basis points to 2.50 percent and has now cut it by 175 points this year following earlier cuts in March, April and May.
     A majority of five of the bank’s seven-member board voted for the rate cut, the bank said.
     Today’s 25-basis-point cut is smaller than the previous cuts this year that were all 50 points.
     Colombia’s inflation rate fell to 2.85 percent in May from 3.86 percent in April, and inflation expectations continued to decline to below 3.0 percent, reflecting weak demand, a deterioration of employment and excess productive capacity, the bank said.
     Downward revisions to local and global growth suggest this excess productive capacity will expand and labour markets will deteriorate further, the bank said, adding its main trading partners will only expand slowly during the rest of the year.
     Although conditions in financial markets have improved from the start of the Covid-19 pandemic, there is still great uncertainty about the global economy, the central bank said.
     Colombia’s gross domestic product slumped to annual growth of 1.1 percent in the first quarter of this year from 3.5 percent in the previous quarter and on a quarterly basis GDP contracted by 2.4 percent in the first quarter from the fourth quarter of last year.
     Colombia’s finance ministry expects the country’s economy to contract 5.5 percent this year while the central bank in May forecast a contraction of between 2.0 and 7.0 percent this year, including a 10-15 percent annual contraction in the second quarter.

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