Colombia central bank holds rate at 1.75pc as previous cuts take effect

BOGOTA: Colombia's central bank board held benchmark borrowing costs at a historic low of 1.75% on Friday, as the economy responds to monetary policy stimulus.

The decision was in line with predictions by 14 analysts in a Reuters survey this week, who said the seven-member board would keep the rate steady as it tracks economic recovery.

The board cut 250 basis points from the rate earlier this year in a bid to bolster the economy and provide relief for businesses and individuals during more than five months of national quarantine.

"The most recent economic growth indicators confirm the expected pace of recovery in activity and this evolution is expected to continue in 2021," the board said in a statement read by chief Juan Jose Echavarria. "The loan portfolio and interest rates continue to respond to monetary policy stimuli."

Unemployment figures, which soared during lockdown, were beginning to improve, but the labor market has "severe structural problems," the statement added.

Friday's hold takes place amid controlled inflation, set to finish this year well below the central bank's 3% target rate, as domestic consumption remains reduced and unemployment high.

Consumer prices increased 1.75% in the 12 months to October. Urban unemployment was 18.3% in September, down from a high of nearly 25% earlier in 2020.

The bank maintains its long-term inflation target rate, Echavarria said, with expectations anchored around 3% for 2021 to 2023.

The market is awaiting news of Echavarria's replacement as the head of the board. Echavarria, whose term ends on Dec. 31, announced last month he would not seek re-election.

The rate is seen remaining steady until at least the final quarter of 2021, after a predicted economic contraction of between 6.5% and 9% this year.