Colombia Monetary Policy May 2017

Colombia

Colombia: BanRep cuts rates in May for third consecutive time

May 26, 2017

The board of the Central Bank (BanRep) decided to cut the policy rate by 25 basis points to 6.25% at its 26 May monetary policy meeting, which was in line with market expectations. March’s cut was the third in a row and the fourth since December.

Inflation, which had reached an over-decade high in July 2016, has fallen every month since then and will likely continue to moderate towards the Bank’s target rate as the effects of strong supply-side shocks that fueled inflation last year continue to fade. These improved conditions and a weaker-than-expected Q1 GDP reading prompted the BanRep to continue on its easing cycle. Colombia’s commodity-dependent economy has struggled to regain its footing ever since oil prices started to fall towards the end of 2014.

In its press release, the Central Bank stated that there was consensus among the board to continue lowering the policy rate as it considers that, “the current level of the real ex ante policy interest rate is contractionary.”

The next monetary policy meeting is scheduled for 30June.

Against this backdrop, the majority of panelists participating in the LatinFocus Consensus Forecast see the policy rate ending 2017 at 4.3% and they expect it to end 2018 at 3.5%.


Author:, Economist

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Colombia Monetary Policy May 2017

Note: Central Bank policy rate in %.
Source: Colombia Central Bank.


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