BOGOTA, Aug 31 (Reuters) - Colombia’s central bank board cut the benchmark interest rate to a historic low of 2% on Monday, in what analysts say is likely the last move in a reduction cycle meant to boost the economy during the coronavirus pandemic.
The following is a Reuters translation of the statement accompanying the bank’s interest rate decision:
The board of directors of the central bank unanimously lowered its interest rate by a quarter of a percentage point to 2%. This decision took into consideration the following elements:
Inflation in July was 1.97% and the average of the core inflation indicators stood at 1.76%. According to surveys, inflation is expected to reach 2.87% by the end of 2021, while the two-year expectations obtained from debt papers stand at 1.56%.
The growth result in the second quarter confirms a weak aggregate demand and excess production capacity.
The June data reiterates the deterioration in the labor market and reduction in labor income.
Financial market conditions have improved compared to the beginning of the crisis and the high liquidity of international and local markets has translated into lower sovereign risk premiums and adequate access to external financing.
Additionally, there has been an adjustment in the current account deficit which is expected to continue throughout the year and which reflects lower external financing needs.
Under these conditions, the balance of risks for monetary policy suggests the convenience of providing an additional boost to the economy. The impact of monetary policy will be greater to the extent that the conditions of the pandemic allow the gradual reopening of the different sectors to continue. (Compiled by Oliver Griffin; Editing by Richard Chang)
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