August 31, 2017 / 8:45 PM / a year ago

UPDATE 1-Colombia central bank cuts interest rate to 5.25 pct, as expected

(Adds quotes, details on decision)

By Julia Symmes Cobb and Nelson Bocanegra

BOGOTA, Aug 31 (Reuters) - Colombia’s central bank board lowered the benchmark interest rate by 25 basis points to 5.25 percent on Thursday, taking advantage of falling inflation to try to boost sluggish economic growth.

The board has been grappling for more than two years with the pressures of a weak economy, caused by the global drop in oil prices, and inflation that peaked at almost 9 percent in mid-2016, more than double the bank’s long-term target range.

The reduction, predicted by a majority of analysts in a Reuters survey, is the seventh consecutive cut and the eighth overall since the board began reductions in December.

Four of seven board members backed the decision, the statement said. Two of the remaining members voted to reduce the rate by 50 basis points, while the final policymaker voted to hold the rate.

Thursday’s cut may be one of the last for the year, bank chief Juan Jose Echavarria said, adding some economic indicators suggest the interest rate is close to a neutral level.

“The discussion was about how close we are getting to a neutral rate, we think we are closer,” Echavarria said. “This could perhaps be one of the final reductions of the year, although we always have to look at the new information available each month.”

Thirteen of 19 analysts polled by Reuters this month said this cut would mark the last of 2017, while the other six leaned toward one more reduction.

It is expected the bank will return to cuts next year.

Domestic demand has accelerated more than expected thanks to government spending, the board said in a statement, but the dynamics of household consumption are still weak.

The economy grew 1.3 percent in the second quarter, slightly less than expected by the market, but policymakers expect higher growth in the second half of the year, the statement said.

“Available economic activity figures suggest that the slowdown in the economy bottomed out and that higher growth can be expected during the second half,” the statement said.

Food prices have fallen, the board added, and inflation figures were better than expected, allowing for the rate reduction.

Twelve-month inflation fell to 3.4 percent last month, the second month in a row the figure has been within the bank’s 2 to 4 percent target range.

But inflation is still likely to increase slightly before the end of 2017 and uncertainty remains about whether it will be within the target range. (Reporting by Julia Symmes Cobb and Nelson Bocanegra; Editing by Peter Cooney and James Dalgleish)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below