By Central Bank News
The Central Bank of Colombia cut its benchmark overnight lending rate by 25 basis points to 4.75 percent, as expected, and said a further weakening of global growth is likely.
The bank also said it would purchase $700 million on foreign exchange markets during the rest of August and September to provide liquidity to the economy.
The central bank, which already reduced its key rate by 25 basis points in July, said second quarter results had confirmed that global growth was weakening and the latest trade and industry data suggested a further transmission of problems in Europe to the rest of the world.
“This raises the likelihood of an even weaker global growth in the future,” Banco de la Republica Colombia said in a statement, adding: “International financial markets remain volatile and the risks from Europe continue to affect confidence.”
The purchase of $700 million by the end of September should slow down the rise in the peso, which has strengthened over 6 percent this year against the U.S. dollar, raising the cost of exports.
Markets had expected the central bank to cut rates again after minutes from the July meeting showed pessimism over growth prospects and some committee members had voted to cut the interest rate by 50 basis points. In January the bank had raised rates by 25 basis points.
The central bank said the value of commodity exports from mining continued to slow, mainly due to lower international prices, and agriculture sector and industry contracted.
Inflation remained relatively stable and inflation expectations fell, the bank said.
Colombia’s GDP expanded by 4.7 percent in the first quarter from the same quarter last year, a sharp drop from a 6.1 percent growth rate in the fourth quarter.
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