Colombian central bank board may resume rate cuts

Colombia's central bank board looks set to resume cutting its benchmark interest rate on Monday with the support of new board members despite inflationary pressures and a difficult fiscal situation.

A recent Reuters poll of 21 analysts showed 16 of them predicted the central bank would cut its benchmark rate by 25 basis points to 9.25% this month, while one analyst predicted it would cut by 50 basis points to 9.00%. The remaining four predicted that the rate would remain at 9.50%.

“The arrival of two new board members and a new finance minister could change the balance of the board, altering expectations about its future decisions and the country’s monetary policy,” investment holding company Corfi said in a note.

The first rate vote will be held on Monday, with voters including Laura Moisa-Elicabide and Cesar Giraldo, who were recently nominated to the seven-member board by President Gustavo Petro, and new Finance Minister German Avila, who told reporters on Thursday he would opt for a rate cut.

But other analysts said the central bank was likely to keep interest rates unchanged.

"Complicated fiscal situations, rising inflation and a cautious approach by central banks in the U.S. and the region support a new pause," brokerage Alianza said in a note.

The board voted by a majority to keep interest rates unchanged in its last vote in January, the first pause since the rate-cutting cycle began in December 2023.

According to a Reuters poll, the benchmark rate will reach 7.75% by the end of this year, compared with a forecast of 7% in the previous poll.