BOGOTA, Oct 5 (Reuters) – Colombia’s consumer price growth will end this year at 1.5%, the head of the central bank said on Monday, less than predicted by analysts who cite the coronavirus pandemic’s effect on demand.
The projected figure is also well below the bank’s 3% long-term target rate.
Central bank board chief Juan Jose Echavarria did not detail the reasons behind the prediction, but it is in line with previous estimates from the bank of inflation between 1% and 2% for 2020.
“The (bank’s) technical team expects to close 2020 with numbers similar to 1.5% for this year and numbers closer to 3% in 2021,” Echavarria told a congressional committee.
The figure is less than the 1.7% consumer price growth predicted by 16 analysts in a Reuters survey last week. Inflation figures for September will be released later on Monday.
The technical team expects gross domestic product contraction of between 6% and 10% this year, Echavarria said, with an average prediction of 8.5%. Economic expansion will rebound to 4.1% next year, he added.
The central bank board has cut the benchmark interest rate by a total of 250 basis points over the last seven months as Colombia held more than five months of national quarantine, sending unemployment soaring and shuttering businesses.
The September decision to trim borrowing costs to a historic low of 1.75% was backed by four of the seven board members.
“In terms of interest rates, the message of the board has been that we are cutting but the cycle is ending,” Echavarria said.
The central bank will make about 7.3 trillion pesos ($1.88 billion) in profits this year, he added, saying those figures are equivalent to what the government could raise with a tax reform.
“A good part of those expected profits for 2020 are because interest rates have fallen and our paper has gained value,” Echavarria said.
(Reporting by Carlos Vargas Writing by Julia Symmes Cobb; editing by Grant McCool)
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