On Wednesday, Colombia’s central bank announced a reduction in its benchmark interest rate by 50 basis points to 10.75%. This marks the sixth consecutive rate cut since December, reflecting an improved economic outlook from the bank’s technical team. The latest decision was supported by five out of seven board members, with two members advocating for a more substantial 75 basis point decrease.
This move aligns with market predictions. A recent poll conducted by Reuters, which surveyed 22 analysts, had anticipated the central bank’s decision to lower the rate to 10.75%, down from 11.25%. This adjustment brings the benchmark interest rate to its lowest point since 2022.
In contrast, the U.S. Federal Reserve opted to maintain its benchmark overnight rate between 5.25% and 5.50%, citing ongoing concerns about high inflation. However, the Fed indicated that a potential rate cut could be considered in September.
The Colombian central bank’s technical team revised its economic growth forecast for the year to 1.8%, an increase from the previous 1.4%. Despite this positive adjustment, inflation remained a concern, with the 12-month inflation rate at 7.18% through the end of June, slightly above the 7.16% recorded at the end of May. This figure continues to exceed the bank’s target of 3%.
With the latest rate cut, the total reduction in the benchmark interest rate since December amounts to 250 basis points. The central bank’s decision precedes the upcoming release of Colombia’s second-quarter growth data, which is expected to provide further insights into the necessary economic measures moving forward.
