By Nelson Bocanegra
BOGOTA, January 26 (Reuters) – Colombia’s central bank is expected 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 divided on the size of a possible cut.
Eleven of the 21 analysts surveyed forecast a 50 basis point 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 December 19 with a 25 basis point cut to the interest rate, which took it to 13%.
“The central bank could continue its cuts to the reference rate amid recent data on industry, trade and construction that show a significant slowdown,” said analyst Daniela Guio of investment management firm Fidubogota.
“Likewise, inflation continued along a negative trend and generated a stabilization in inflation expectations derived from the public debt market,” added Guio.
During Colombia inflation closed 2023 at 9.28%well above the central bank’s 3% target, the metric recorded nine months of slowdown 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% earlier in the December survey. Analysts still predict that the rate will end 2025 at 5.5%.
(Reporting by Nelson Bocanegra; Writing by Oliver Griffin; Editing by Jonathan Oatis)
((Oliver.Griffin@thomsonreuters.com; +57 304-583-8931;))
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