Post by livinginmedellin on Dec 17, 2016 8:06:28 GMT -5
Colombia’s central bank on Friday lowered its benchmark interest rate for the first time in nearly four years, pointing to easing inflation and sluggish economic growth.
The central bank’s board of directors surprised analysts by voting in 4-3 to cut the rate by 25 basis points to 7.5%. Some private-sector economists had expected the central bank to start cutting rates next year as growth has faltered due to lower oil prices.
In a statement, the central bank said its decision took into account that the slowing of Colombia’s annual inflation over the last four months was faster than expected. In November, inflation declined to 6% from 6.5% in the previous month. Inflation had reached a 16-year high of 9% in July.
“The effects of the strong transitory shocks on supply that altered the course of inflation from its target continue to ease quickly,” the central bank said.
The central bank reconfirmed its aim for inflation to converge toward its target range of 2% to 4% in 2017.
The central bank said its decision also took into account that global economic activity remains weak, but with signs of slight improvements in 2017.
In Colombia, the economy grew a lower-than-expected 1.2% in the third quarter, as domestic demand contracted due to less investments and consumption. The monetary authority said, however, that Colombia’s terms of trade were improving thanks to higher oil prices. It expects economic growth of 2% for all of 2016.
“The future policy actions will depend on new information about the speed of inflation’s convergence to the target and the intensity, nature and persistence of the economic slowdown,” among others things, the central bank said.
The central bank’s decision follows months of tightening, as it raised rates through much of last year and part of this year over concerns about high inflation.
See: www.wsj.com/articles/colombias-central-bank-lowers-benchmark-rate-by-quarter-point-to-7-5-1481925677
The central bank’s board of directors surprised analysts by voting in 4-3 to cut the rate by 25 basis points to 7.5%. Some private-sector economists had expected the central bank to start cutting rates next year as growth has faltered due to lower oil prices.
In a statement, the central bank said its decision took into account that the slowing of Colombia’s annual inflation over the last four months was faster than expected. In November, inflation declined to 6% from 6.5% in the previous month. Inflation had reached a 16-year high of 9% in July.
“The effects of the strong transitory shocks on supply that altered the course of inflation from its target continue to ease quickly,” the central bank said.
The central bank reconfirmed its aim for inflation to converge toward its target range of 2% to 4% in 2017.
The central bank said its decision also took into account that global economic activity remains weak, but with signs of slight improvements in 2017.
In Colombia, the economy grew a lower-than-expected 1.2% in the third quarter, as domestic demand contracted due to less investments and consumption. The monetary authority said, however, that Colombia’s terms of trade were improving thanks to higher oil prices. It expects economic growth of 2% for all of 2016.
“The future policy actions will depend on new information about the speed of inflation’s convergence to the target and the intensity, nature and persistence of the economic slowdown,” among others things, the central bank said.
The central bank’s decision follows months of tightening, as it raised rates through much of last year and part of this year over concerns about high inflation.
See: www.wsj.com/articles/colombias-central-bank-lowers-benchmark-rate-by-quarter-point-to-7-5-1481925677