“The central bank’s decision to cut rates may be a signal that the authorities are focusing more on fighting currency appreciation and may have to pay the inflation costs of such a policy shift,” said Morgan Stanley analyst Daniel Volberg.
Colombia’s Central Bank dropped the interest rate from 3.5% to a new record low base rate of 3% on Friday, surprising many onlookers.
The bank decided to make the cut on the ground that inflation levels appear to be low and stable. Consumer inflation fell 25 points on February’s figures, a significantly better result than was expected by the Banco de Republica.
The new projections made by the bank’s board are that inflation will end the year around 3%, squarely within the 2-4% target range.
Information received in recent weeks suggests that the economy is recovering faster than expected, without generating inflationary pressures.