Colombia Cuts Key Rate for the Seventh Time Since Covid-19 Hit

Colombias central bank cut interest rates to a record low in a split decision after inflation slowed below its target and the weak recovery left a quarter of urban workers still jobless.

Four of the banks seven-member board voted to reduce the benchmark rate by a quarter percentage point to 1.75%, Governor Juan Jose Echavarria said after the meeting. The other three voted to leave the rate unchanged at 2%.

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The move was the seventh straight rate cut since the coronavirus pandemic hit Colombia in March, and is expected to be the last for the time being.

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The decision was forecast by 13 of 22 economists surveyed by Bloomberg, while the rest had expected no change.

Colombia is suffering its deepest slump this year since records began, with more than three million jobs destroyed since March and widespread bankruptcies. Now, as the economy emerges from lockdown and life slowly returns to normal, policy makers are expected to pause while they gauge the strength of the recovery.

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Ahead of today‘s decision, swaps traders were betting that a cut would be the last for the time being. Economists in Brazil, Peru and Chile are also forecasting that rates in their countries won’t go any lower, while Mexicos central bank is seen nearing the end of the road after a quarter-point reduction this week.

In August, Colombias annual inflation slowed to 1.88%, undershooting the target of 2% to 4% for a second straight month. The central bank forecasts that the economy will contract 8.5% this year, which would be its worst-ever downturn.

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Starting this month, authorities allowed restaurants to open for dine-in customers and hotels to operate normally again while domestic and international flights reopened and big cities lifted mobility restrictions.

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