Friday, November 27, 2020

Colombia holds rate 2nd time, says recovery continues

     Colombia's central bank left its benchmark interest rate steady for the second month, as widely expected, saying the most recent economic data "confirm the expected pace of recovery in activity and this evolution is expected to continue in 2021."
     The Central Bank of Colombia, which last month paused after seven rate cuts from February to September, added loans and interest rates continue to respond to the earlier monetary stimulus and external financing conditions remain favorable for the country's economy.
      The central bank left its intervention rate at 1.75 percent, having lowered it by a total of 250 basis points this year. 
     Since December 2016, when the central bank started lowering the rate from 7.75 percent after inflation began decelerating, the rate has been cut 18 times by 6 percentage points.
      As in October, the central bank's board of directors were unanimous in their decision and in a separate statement, the board said it had maintained the inflation target for 2021 at 3.0 percent, plus/minus 1 percentage points.
      Following the board's meeting last month, the bank's governor, Juan Jose Echavarria, who has headed  the bank since 2017 and overseen the fall in inflation, announced he was resigning when his term expires in January next year for "family reasons."
      Colombia's inflation rate fell further to 1.75 percent in October from a 2020-high of 3.86 percent in March but the central bank said inflation expectations for 2021 to 2023 were still anchored around 3.0 percent.
      Colombia's economy bounced back in the third quarter, expanding by a quarterly 8.7 percent after contracting by 16.1 percent in the second quarter and 1.4 percent in the first quarter.
      The bank has forecast a contraction of 6.5 to 9.0 percent in gross domestic product after growing 3.3 percent in 2019.
      After plunging in March, Colombia's peso has been slowly trending firmer and has risen 7.5 percent so far this month to 3,606.2 against the U.S. dollar today. But since the start of this year, the peso remains down 8.9 percent.


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