BOGOTA (Reuters) -The technical team of Colombia’s central bank on Wednesday lowered its outlook for inflation in 2023 to 9%, from 9.5% previously, and cut its forecast growth for Latin America’s fourth-largest economy to 0.9%.
The technical team previously forecast Colombia’s economic growth at 1% for this year.
The revisions in the team’s quarterly monetary policy report follows the unanimous decision by the bank’s board on Monday to hold the benchmark interest rate stable at 13.25% for the second month in a row.
Colombia’s 12-month inflation through June 30 hit 12.13%, slightly below the 12.2% expected by analysts who were consulted for a Reuters poll.
The technical team forecast that inflation would end 2024 at 3.5%, close to the bank’s long-term target of 3%, but above a previous forecast of 3.4%.
“The cumulative effects of monetary policy decisions and the dissolution of some of the shocks that have affected prices will contribute to inflation approaching the target in 2024,” the report said.
The new estimates are “subject to a high degree of uncertainty,” the report said, citing external factors like global political tension and internal factors, such as uncertainty as to whether or not the government will pass reforms through Congress.
The current economic context suggests the board should maintain a contractive stance on monetary policy to bring inflation towards the target, the report added.
Most analysts expect the board will start cutting the interest rate in September or October to avoid greater impact on growth, though Finance Minister Ricardo Bonilla said cuts would depend on further deceleration of inflation.
President Gustavo Petro said this week he also expects rate cuts from September.
Analysts expect the board to cut the benchmark interest rate to 11.75% by the end of this year, before lowering it further to 7.25% at the end of 2024.
(Reporting by Nelson Bocanegra and Oliver Griffin; Editing by Leslie Adler and Christopher Cushing)