Colombia’s Central Bank Likely to Implement 50 Basis Point Rate Cut in Final Meeting of 2024

Colombia’s central bank is expected to lower the benchmark interest rate by 50 basis points to 9.25% in its upcoming meeting. Analysts suggest this is necessary due to the nation’s fiscal challenges and global economic uncertainties. The anticipated cut would be the seventh consecutive reduction, aimed at controlling inflation, which remains above the target rate.

On December 15, the board of Colombia’s central bank is anticipated to vote on a 50 basis point reduction in the benchmark interest rate during its final meeting of the year. Analysts project that this decision will reduce the rate from its current level to 9.25%, marking the seventh consecutive 50 basis point cut. All 25 analysts participating in a recent Reuters poll foresee this action amidst ongoing global economic uncertainty and Colombia’s domestic fiscal challenges, particularly under the administration of President Gustavo Petro.

The backdrop of this anticipated rate cut includes significant fiscal difficulties faced by the Colombian government, which have jeopardized adherence to established fiscal regulations designed to curb excessive spending. A considerable $2.7 billion fiscal reform initiative aimed at financing 2025 expenditures was recently dismissed by Congress. Furthermore, Colombia’s Autonomous Fiscal Rule Committee has indicated the necessity for substantial spending reductions amounting to 40 trillion pesos this year, followed by an additional 52 trillion pesos the next year. In light of these fiscal challenges, the central bank has adjusted its inflation forecast for 2023 to 8.7%, with recent 12-month inflation figures at 5.20%, significantly above the bank’s target of 3%.

In conclusion, the Colombian central bank’s forthcoming meeting on December 15 is pivotal, as analysts unanimously predict a 50 basis point cut in the benchmark interest rate. This decision is reflective of pressing fiscal concerns and a careful approach to maintain economic stability amidst ongoing challenges. As the central bank navigates a complex economic landscape, it remains focused on aligning inflation rates with its targets while addressing the significant fiscal pressures faced by the government.

Original Source: www.brecorder.com