Colombia cuts rate to historic low

Colombia cuts rate to historic low

Economy & Policy Regulation Barbados Andean Coronavirus

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Banco de la República, the central bank of Colombia, said Friday that it cut the benchmark interest rate by 50 basis points to 2.75% as "it continues with the countercyclical monetary policy stance."

Five board members voted to lower the rate by 50 basis points, while the other members voted to cut it by 25 basis points, the central bank said in a press release.

Rising unemployment levels and spare production capacity as inflation expectations continued to decline convinced the bank to cut the rate. The second quarter, however, could be worse, Juan José Echavarría, head of the central bank, said in an online press conference after the decision.

"The historically low rates are a reflection of country conditions," he said. "The bank's technical team is expecting a contraction ranging between 3% and 7% this year."

Colombia locked down the economy on April 13, just as the country reached 112 deaths from COVID-19. As of Friday, Colombia had 25,406 confirmed cases and 855 deaths, according to the Johns Hopkins Coronavirus Resource Center. On Thursday, President Iván Duque extended the lockdown to July 1.

More than 5.3 million Colombians lost their jobs in the first month of the lockdown, bringing the unemployment rate to 19.8%, according to a report released by national statistics bureau DANE on Friday.

According to Echavarría, employers across Colombia have said they do not plan to make new layoffs. "This is important news," he said.