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Colombia Interest Rate Cut Likely if Sept 12-month Inflation Under 11% -Minister

BOGOTA, Oct 5 (Reuters) – Should Colombia see 12-month inflation through the end of September below 11%, the central bank would “very likely” make its first cut of 25 basis points to its benchmark interest rate at the end of this month, Finance Minister Ricardo Bonilla said on Thursday.

Persistent inflation has pushed the bank to hold its benchmark interest rate at 13.25% since June, after having increased it by a total of 1,150 basis points during an upward monetary cycle.

According to preliminary information, the prices of agricultural goods and food decreased in September, Bonilla said. “That could lead us to positively expectation that the inflation data from DANE (the government statistics agency) tomorrow will be around 11% or below 11%,” Bonilla told reporters.

“If that’s the case, it’s very likely that the central bank will lower the benchmark rate by 0.25% in October,” he added.

A Reuters poll on Friday found the median forecast from 16 analysts put 12-month inflation through September at 10.98%. Inflation data will be published by DANE on Friday.

While the bank board last week voted to hold the rate steady, two board members – one of them Bonilla – voted to cut it by 25 basis points.

If inflation falls as expected toward the end of the year, Bonilla forecast the board will make a cut of 50 basis points to the rate in December. The board does not vote on the benchmark rate in November.

“We could close the year with a benchmark interest rate of 12.5% and single-digit inflation,” he added.

Bonilla has met with representatives of Standard & Poor’s, he said, adding that the ratings agency had highlighted improvements in reducing debt and the current account deficit, but also called for the deficit in the FEPC fuel fund to be reduced. (Reporting by Carlos Vargas and Nelson Bocanegra Writing by Oliver Griffin; Editing by David Gregorio)

Source : reuters