BOGOTÁ, Mar 27 (Reuters) – The Central Bank of Colombia lowered its interest rate on Friday for the first time in nearly two years, to promote further stimulus to the economy, which will grow less due to shocks stemming from the spread of the coronavirus, by time that announced new measures to supply liquidity to the markets.
The agency cut the interest rate by 50 basis points to 3.75%, in a decision that received the unanimous vote of the seven members of the board. This is the lowest rate since April 2014.
In a Reuters poll, only two of the 20 analysts surveyed anticipated the rate’s movement, while 12 of them expected stability in the cost of money and the rest projected a different decrease.
Although the bank did not immediately provide a change in the economic growth projections for this year, the agency’s manager, Juan José Echavarría, anticipated that it will be significantly lower due to the impact of COVID-19.
“We have two different shocks, a shock from the virus and one from the price of oil … and the duration of the shocks are going to be different as well,” he told reporters. “Of course the virus will slow down the economy … for Colombia it will be much less than the 3.3% that we had in mind.”
Analysts downgraded their economic growth projections for this year and expect an average of 2.5% biased to be lower, compared to the government target of 3.7%.
The Colombian bank has aligned itself with the global trend, in which most of its peers, such as the Fed, have drastically cut the cost of money in the last month to try to appease the growing signs of a global recession due to the impact of COVID. -19 on the activity.
Additionally, the bank announced new auctions to sell dollars in the future through various mechanisms, as well as in local currency.
The entity will make a new auction of “Swaps” on Monday for 400 million dollars, in which it sells dollars in cash and buys them in the future, in 60 days.
He also said that he will expand the exchange hedging mechanism through a new auction of financial compliance forward operations or “Non-Delivery Forwards” for $ 1 billion to 30 days.
Since last week, the issuing body has enacted several measures along these lines in extraordinary board meetings.
Echavarría said the bank will continue to support the markets, but admitted that most of its arsenal has already been used.
“I believe that in the toolbox almost all the measures that we could take have already been taken,” he said. “Of course we can expand quotas, we can continue with swaps and NDF support to provide coverage and to facilitate dollar transactions, but I don’t see new instruments anymore.”
(Report by Nelson Bocanegra, additional report by Carlos Vargas. Edited by Luis Jaime Acosta)