Colombia Monetary Policy March 2017

Colombia

Colombia: Central Bank cuts rates in March for second consecutive month

March 24, 2017

In line with market expectations, the board of the Central Bank (BanRep) decided to cut the policy rate by 25 basis points to 7.00% at its 24 March monetary policy meeting. March’s cut was the second in a row and the third since December.

Inflation, which had hit an over-decade high in July 2016, has fallen every month since then and will likely continue to decrease as the effects of strong transitory supply shocks that fanned inflation last year continue to fade. These improved conditions are allowing the Bank to cut rates and provide Colombia’s battered economy with easier financial conditions. Last year, the oil-dependent economy recorded its worst economic performance since the height of the global financial crisis in 2009 and it could remain subdued this year if energy prices fail to recover further.

The statement was clearly dovish as BanRep mentioned that “additional reductions will consider the risk balance between a slow convergence of inflation to its 3.0% target and an excessive slowdown of economic activity”, thus suggesting that the easing cycle will continue.

The next monetary policy meeting is scheduled for 28 April.

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 3.4%.


Author:, Economist

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Colombia Monetary Policy Chart


Colombia Monetary Policy March 2017

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


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