(Bloomberg) — Colombia’s central bank cut its benchmark interest by half a percentage point to 11.25% on Friday, defying government pressure to accelerate the pace of monetary easing to revive economic growth.
Four of the seven-member board backed the decision, while two argued for a bigger reduction of three quarters of a percentage point, bank Governor Leonardo Villar told reporters after the meeting. One member was absent from the meeting for “justified reasons”, the bank said.
All 28 analysts surveyed by Bloomberg correctly forecast the move.
“With today’s decision, monetary policy maintains a stance in line with the objective of getting inflation to its target by the middle of 2025, while at the same time giving a new impulse to the recovery of economic growth,” the bank said in its statement.
President Gustavo Petro, Finance Minister Ricardo Bonilla, and some of the nation’s largest private banking groups, such as Grupo Aval SA and Bancolombia SA, have all urged the central bank to speed up monetary easing to boost the weak economy. However, the central bank has so far ignored outside pressure, arguing that its cautious approach is needed ensure that inflation slows to its target range of 3% plus or minus one percentage next year.
Last month, Colombia’s annual inflation rate stopped slowing for the first time in more than a year, remaining stuck at 7.16%. The bank’s inflation fight is also being complicated by a wider-than-forecast fiscal deficit, and the peso’s depreciation.
Colombia still has the highest benchmark interest rate among major inflation-targeting economies in the Americas, even after cutting it by two percentage points since December. Mexico, Brazil, and Peru all held interest rates unchanged this month as inflationary pressures grow.
The central bank forecasts that the economy will expand 1.4% this year and 3.2% in 2025. Analysts surveyed by the bank forecast that policymakers will accelerate the pace of rate cuts, to three quarters of a percentage point, in September.
(Adds breakdown of board vote in second paragraph)
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