Colombia’s central bank board is poised to continue cutting its benchmark interest rate on Monday, with the backing of newly appointed board members, even amid inflationary pressures and a challenging fiscal situation.
A recent poll of 21 analysts showed that 16 analysts expect a 25-basis-point reduction to the interest rate, bringing it down to 9.25%. One analyst even predicted a more significant 50-basis-point cut to 9.00%. The remaining four analysts forecast that the rate will remain steady at 9.50%.
The shift in expectations is largely due to the recent appointments of Laura Moisa-Elicabide and Cesar Giraldo to the seven-member board, alongside new finance minister German Avila. Corfi, an investment holding company, suggested in a note that these changes could alter the board’s decision-making dynamic and influence the country’s monetary policy.
Monday’s vote will be the first for Moisa-Elicabide and Giraldo, who were appointed by President Gustavo Petro, as well as for Finance Minister Avila. Avila had indicated on Thursday that he would advocate for a rate cut.
However, some analysts caution that the board may opt to keep the rate unchanged. “The ongoing fiscal difficulties, rising inflation, and cautious policies by central banks in the U.S. and across the region suggest the possibility of a pause,” said Alianza brokerage in a statement.
In January, the central bank voted to hold the rate at 9.50%, marking its first pause since the rate-cutting cycle began in December 2023.
The latest survey predicts that Colombia’s benchmark rate will end the year at 7.75%, a slight increase from the 7% forecast in the previous survey.
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