Colombia's Central Bank Surprises Markets with Lower-than-Expected Rate Cut

Forex - The Central Bank of Colombia (Banrep) unexpectedly slowed down the pace of interest rate cuts due to financial concerns weakening the country's currency and increasing inflation risks.

According to a statement from Banrep, the policy interest rate was reduced by 25 basis points to 9.50%, below the market expectation of a 50 basis point cut.

The monetary policy board was divided on the decision; five members supported the 25 basis point cut, while one voted for a 50 basis point reduction and another for a 75 basis point cut.

The bank indicated that inflation will continue to converge towards the target, but it will do so "at a slower pace than previously forecasted in October due to the pressures of the weakening currency and its effects on domestic prices."

Since the beginning of the year, the Colombian peso has depreciated by 12% against the dollar.