The Central Bank of Colombia’s technical team has cut its 2023 inflation forecast to 9% from the previous 9.5% and cut growth forecasts for Latin America’s fourth-largest economy to 0.9%.
The tech team had previously expected Colombia’s economy to grow by 1% this year.
The team’s modification to its quarterly monetary policy report comes after the board unanimously decided to hold rates steady at 13.25% for the second month in a row.
Colombia’s 12-month inflation rate reached 12.13% through June 30, just below analyst expectations of 12.2%, which was referenced in a Reuters poll.
The technical team expects inflation to reach 3.5% by the end of 2024, close to the central bank’s long-term target of 3% but above the previous forecast of 3.4%.
“The cumulative effects of monetary policy decisions and the easing of some of the shocks that have affected prices will bring inflation closer to target in 2024,” the report said.
“The new estimates are subject to considerable uncertainty,” the report added, citing external factors, such as global political tensions, and internal factors, such as uncertainty over whether the administration will pass reforms through Congress.
“The Governing Council needs to maintain tight monetary policy to bring inflation closer to its target”, the report added.
Most analysts expect the Fed to start cutting interest rates in September or October to avoid a major hit to growth. But Finance Minister Ricardo Bonilla said the rate cut would be conditional on a further slowdown in inflation.
President Gustavo Petro also said this week that he expects a rate cut from September. Analysts expect the Governing Council to cut the rate to 11.75% by the end of this year and then to 7.25% by the end of 2024.
