By By Nelson Bocanegra and Carlos Vargas
BOGOTA (Reuters) – The board of Colombia’s central bank on Friday voted to cut its benchmark interest rate by a surprise 25 basis points to 9.50%, less than expected by the market, citing global financial pressures and the work of other central banks to raise their own interest rates.
All 25 analysts in a recent Reuters poll said they expected the board to vote for a cut of 50 basis points.
Five of the board’s seven policymakers voted for a 25 basis point cut, one for a 50 point cut and one for 75 points, board director Leonardo Villar said in a press conference.
“In 2025, the technical team forecasts that inflation will continue to converge towards the target, although more slowly than expected in the October (monetary policy) report, due to upward pressures on the exchange rate and its pass-through to prices. This reduces the room for maneuver to maintain the pace of interest rate cuts,” the board said in its statement.
The economy has accumulated growth of 1.6% until September, the board added, compared to the same period in 2023, and the labor market has remained relatively stable.
“Uncertainty about the situation of public finances in Colombia has generated volatility in the exchange rate and public debt markets,” the board added.
The government of President Gustavo Petro has been afflicted with fiscal troubles, which have put at risk compliance with the country’s so-called fiscal rule, designed to impose limits on spending to prevent deterioration of public finances.
This month Congress rejected a $2.7 billion fiscal reform proposed by the government to finance 2025 spending.
On Thursday, Colombia’s Autonomous Fiscal Rule Committee said the Andean country would need to cut spending this year by 40 trillion pesos, followed by a subsequent cut of 52 trillion pesos next year.
Colombia’s 12-month inflation through the end of November closed at 5.20%, above the bank’s 3% target.
The bank has cut its benchmark rate by 350 basis points since December last year.