Colombia’s central bank cut its benchmark lending rate by a larger-than-expected half a percentage point on Friday, its fifth straight reduction, taking advantage of benign inflation to stimulate the sluggish economy.
The seven-member board, led by Colombian central bank governor Jose Dario Uribe, stepped up the pace of cuts in a unanimous decision, taking the rate to 3.25 percent following quarter-point reductions in previous months.
In a Reuters survey of 21 economists, 17 expected a quarter-point cut, while the rest saw the bank holding the rate steady at 3.75 percent.
“The decision was taken considering the Colombian economy is growing below its potential and will probably operate in the coming quarters below its productive capacity, and observed and projected inflation is falling below the target of 3 percent,” the central bank said in a statement.
With GDP growth well off its expansion levels in 2011, the central bank has tried to promote more investment from Colombian consumers and corporations by cutting 200 basis points from the lending rate since the middle of last year.
“Interest rate reductions appear to be being transmitted to the economy more slowly than hoped for,” the statement added.
Data on Thursday showed the economy grew a better-than-expected 4 percent last year, among the fastest rates in the world, but much slower than the 6.6 percent pace the previous year.
Inflation below the bottom end of the central bank’s target range of between 2 percent and 4 percent has given ample space for the rate cuts. At 3.25 percent, Colombia’s interest rate is the lowest in Latin America.
Annual inflation through last month was 1.83 percent.
“Growth is still below potential while inflation in January and February suggests a deterioration in aggregate demand,” said Cristian Lancheros, an analyst at Acciones y Valores.
Investment in Colombia has soared over the last decade, mostly in the oil and mining industries, reaching record levels and boosting the peso as security improved following a US-backed offensive against rebel groups.
Expansion started to flag last year due to after-effects from the global financial crisis. Industrial production became a concern for the government just as the jobless rate began to improve. The government expects this year’s growth to reach 4.8 percent.
“We are satisfied with the growth level, but that doesn’t make us complacent, there are sectors that need help, industry needs help, measures,” Colombian Finance Minister Mauricio Cardenas, who had called for a rate cut, told reporters late on Thursday.
Manufacturing fell in seven out of 12 months last year, and retail sales remained weak. Exports have fallen in six of the past 12 months.
CHANGE OF FORTUNES: Concern over a pricey valuation and the risk of tighter US curbs on chip sales to China have poured cold water on TSMC’s bullish momentum Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) shares fell the most in three months yesterday upon trading resumption, joining a global technology rout as investors dramatically soured on the promises of artificial intelligence (AI). The shares declined 5.62 percent to close at NT$924 in Taipei, dragging down the benchmark TAIEX, which fell 3.29 percent to 22,119.21 points amid a technical correction, Taiwan Stock Exchange data showed. Other chip stocks also fell, with ASE Technology Holding Co (日月光投控) plunging 9.86 percent, MediaTek Inc (聯發科) dropping 2.35 percent, Realtek Semiconductor Corp (瑞昱) falling 1.33 percent and United Microelectronics Corp (聯電) retreating 1.17 percent, while Apple
Taipei is today suspending work, classes and its US$2.4 trillion stock market as Typhoon Gaemi approaches Taiwan with strong winds and heavy rain. The nation is not conducting securities, currency or fixed income trading, statements from its stock and currency exchanges said. Authorities had yesterday issued a warning that the storm could affect people on land and canceled some ship crossings and domestic flights. Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) expects its local chipmaking fabs to maintain normal production, the company said in an e-mailed statement. The main chipmaker for Apple Inc and Nvidia Corp said it has activated routine typhoon alert
GROWTH: TSMC increased its projected revenue growth for this year to more than 25 percent, citing stronger-than-expected demand for AI devices and smartphones The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday raised its forecast for Taiwan’s GDP growth this year from 3.29 percent to 3.85 percent, as exports and private investment recovered faster than it predicted three months ago. The Taipei-based think tank also expects that Taiwan would see a 8.19 percent increase in exports this year, better than the 7.55 percent it projected in April, as US technology giants spent more money on artificial intelligence (AI) infrastructure and development. “There will be more AI servers going forward, but it remains to be seen if the momentum would extend to personal computers, smartphones and
Odd lot trades of contract chipmaker Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) shares surged on Friday, although the stock faced headwinds, tumbling more than 5 percent in the session, the Taiwan Stock Exchange (TWSE) said. The volume of odd lot trades of TSMC shares totaled about 9.84 million shares on Friday, up sharply by about 400 percent from Tuesday, in a session before the local stock market closed due to Typhoon Gaemi on Wednesday and Thursday, the TWSE added. Stocks in Taiwan are usually bought or sold in lots of 1,000 shares. The nation lifted a ban on odd lots during regular