Tuesday, October 3, 2023

Colombia finmin wants to study lowering cenbank interest rate

(Reuters) – Colombia’s central bank should study cutting its benchmark interest rate in line with other economies to prevent a flood of U.S. dollars into the Andean nation, the country’s finance minister said.

In a Reuters poll on Monday, 19 of 30 analysts believed the monetary authority would keep rates steady at 4.75 percent when it meets on Friday while 11 experts thought that policymakers would lower the rate 25 basis points.

Faster growth in the second quarter may give the central bank room to pause cuts to its overnight lending rate after two consecutive slashes to protect Colombia from a weakening global economy, and to wait for more domestic data.

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Finance Minister Mauricio Cardenas, who is on the bank’s board of directors, said, however, that weak domestic data recently and more asset purchases by the U.S. Federal Reserve should push Colombia’s central bank to mull cutting rates again.

“Given these signals it is very important to review the issue of reducing interest rates in our country so that we have no difference to encourage inflows of foreign exchange into our country,” Cardenas told journalists late on Monday.

“We want interest rates in Colombia which are not much higher than the international ones to try to prevent capital inflows to Colombia.”

Better security over the last decade has attracted billions of dollars in foreign investment, and the $330 billion economy could bring in as much as $17 billion this year, up from about $2 billion in 2000, the government has said.

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Record investment has helped pushed up the value of the peso currency, which is the world’s third-strongest gaining currency of the 152 tracked by Thomson Reuters.

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