BOGOTA, Sept 1 (Reuters) - Capital outflows from Colombia are one of the principal factors the country’s central bank has taken into account when gradually reducing the interest rate over the last six months, the bank board’s chief said on Tuesday.
The seven-member board has cut 225 basis points from the rate since March, taking borrowing costs to a record low of 2% to reduce debt burdens as the economy suffers from the coronavirus pandemic.
A majority of analysts believe the latest rate cut on Monday will be the board’s last in this reduction cycle.
“We have lowered rates in a gradual way because we are also worried about the exit of capital,” board chief Juan Jose Echavarria told a congressional economics committee. “There have been important capital outflows and at all our meetings we weigh these factors, how much will the economy grow, how will inflation behave and also the possible outflows of capital.”
Some $1.86 billion exited portfolios in the country between January and June, compared to an intake of $796.8 million in the same period last year.
Meanwhile, net foreign investment entering Colombia, Latin America’s fourth-largest economy, was down 75% to $1.70 billion in the first seven months of the year.
The government estimates the economy will contract 5.5% this year, while the bank predicts a less optimistic contraction of between 6% and 10%. (Reporting by Nelson Bocanegra Writing by Julia Symmes Cobb; Editing by Richard Chang)
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