Bloomberg News

Nomura Says Colombia Could Cut Benchmark Interest Rate to 3.5%

February 01, 2013

Colombia could cut its benchmark interest rate another 50 basis points to 3.5 percent in the first half of 2013 after a slowdown in growth left the economy operating below capacity, Nomura Securities International Inc. said in a research report published today.

New York-based Nomura analysts Mario Castro and Benito Berber forecast 4.2 percent gross domestic product growth this year, which they say will leave the Andean nation with an “output gap” for the whole of 2013. The economy would need to expand almost 6 percent to close the gap, the report said.

Banco de la Republica last week cut its policy rate a quarter point for the fifth time since June, leaving it at 4 percent, the lowest rate among major Latin American economies, saying the economy is growing below its potential. Bank co- director Juan Jose Echavarria said Jan. 30 that some of his colleagues on the board want to keep cutting interest rates.

Changes to the tax system approved by Congress in December will boost potential GDP growth by 0.3 percent, Nomura said in the report. Central bank Governor Jose Dario Uribe said in a December interview that the economy can grow 4.2 percent to 5.3 percent a year without pushing up inflation.

GDP expanded 2.1 percent in the third quarter from a year earlier, the slowest pace in Latin America after Argentina and Brazil. Colombia’s urban unemployment rate rose to 10.2 percent in December, the national statistics agency said yesterday, the highest among major Latin American economies tracked by Bloomberg.

To contact the reporter on this story: Matthew Bristow in Bogota at mbristow5@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net


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