BOGOTA: Colombia’s central bank will make further cuts to the benchmark interest rate if inflation continues its downward trend, board member Adolfo Meisel, who estimates consumer prices will continue to ease, said on Wednesday. Policymakers surprised the market last week by cutting lending costs by 25 basis points to 5 percent, after holding the rate in September amid uncertainty about how quickly consumer prices were falling and low economic growth.
The seven member board said falling inflation expectations were the reason for the cut. The bank’s technical team estimates consumer prices will end the year at 3.9 percent, just within the 2 to 4 percent target range. “In this path of inflation reduction one senses there will also be a lowering of rates that will happen if we are seeing advances in inflation,” Meisel told journalists after a meeting with congressional lawmakers. “We will continue on the path of reductions in inflation, with some steps forward and some steps back, but the important thing is the trend and the trend of inflation is clearly toward reductions.” Bank board chief Juan Jose Echavarria said after the October meeting that the rate cut did not necessarily mean decreases in the borrowing costs would continue in coming months. Meisel estimated that inflation would end the year close to 4 percent and between 3 and 3.5 percent in 2018. He added that Latin America’s fourth-largest economy would grow 1.8 percent this year, above the bank’s estimate of 1.6 percent.
