By Nelson Bocanegra and Carlos Vargas
BOGOTA (Reuters) -Colombia’s central bank board on Friday unanimously held the benchmark interest rate steady for the first time in nearly two years, with the market anxiously awaiting signs of when policymakers may begin to cut rates as inflation cools.
All 22 analysts polled in a Reuters survey last week said the seven-member board would hold borrowing costs at 13.25%. The board raised the rate by 1,150 points during the increase cycle, which began in September 2021.
“The inflation expectations of economic analysts continued to decrease and are located at 6.4% at 12 months and at 4.0% at 24 months. By the end of 2024, they are located at 5.0% in the median of the sample,” the bank said in a statement announcing the decision.
Annual inflation was 12.36% in May, its lowest since October 2022, but still more than four times the bank’s long-term 3% target.
A majority of the analysts polled by Reuters expect the bank will hold the rate for a few months before beginning cuts in September or October, taking advantage of inflation’s fall to avoid a more severe slowdown in economic growth.
In order to begin lowering rates, inflation will need to be decidedly on the path to the 3% target, bank chief Leonardo Villar said at a press conference after announcing the decision, adding he could not say when that would occur.
“We are tranquil now we’ve had two continuous months of reduction in the rate of inflation and we expect that trend to consolidate and after four or five months of review we will know at what time it will be opportune to lower (the rate),” said Finance Minister Ricardo Bonilla, who represents the government on the board, adding policymakers want to be cautious.
Economic growth has become more moderate, the statement said, while the peso currency has appreciated significantly and risk premiums for Colombia have decreased substantially, all amid high global uncertainty and a fall in oil prices.
The economy is set to grow 1% this year, down from 7.3% growth in 2022.
According to the median of the Reuters survey, the interest rate will close this year at 11.75%, 2024 at 7% and 2025 at 5%.
(Reporting by Nelson Bocanegra and Carlos VargasWriting by Julia Symmes Cobb; editing by Diane Craft)
