Colombian Central Bank Head Cautions Against Accelerating Rate Cuts Due to Inflation Constraints

According to a report by Bloomberg, Colombia’s central bank chief, Leonardo Villar, warned that expediting interest rate cuts may impede further reductions in inflation and interest rates, despite consensus among policymakers regarding the need to loosen monetary policy. Villar made this comment during an interview with a Bogota-based newspaper, El Tiempo, following a decision made by the central bank’s board members last month, where five out of six members opted for a 0.5 percentage point decrease in borrowing costs, while one member advocated for a 0.75 percentage point reduction. The finance minister, Ricardo Bonilla, also favored a full percentage point cut. Villar explained that Colombia has been finding it challenging to speed up its easing cycle because the country’s inflation rate exceeds its long-term target. Price increases have decreased for thirteen consecutive months to 7.16%, whereas the bank’s objective is 3%. Last month’s market disturbances, triggered by the Federal Reserve’s announcement that it would put off lowering lending costs than expected, contributed significantly to the central bank’s decision to maintain the pace of interest rate cuts during its April monetary policy meeting.