Colombia’s economy contracted more than expected in the second quarter, increasing expectations of interest rate cuts over the coming months.
(Bloomberg) — Colombia’s economy contracted more than expected in the second quarter, increasing expectations of interest rate cuts over the coming months.
Gross domestic product shrank 1% in the second quarter from the previous three month period, the national statistics agency said Tuesday. Economists surveyed by Bloomberg had expected a fall of 0.3%.
The slowdown was led by industry and retail, as as the steepest-ever series of interest rate rises hits businesses and households.
The economy grew 0.3% from a year earlier.
Colombia’s rapidly cooling economy and slowing inflation are bolstering analyst forecasts of monetary easing in the near future. Finance Minister Ricardo Bonilla has said he expects monetary easing to start as early as next month.
All of Latin America’s major inflation-targeting economies are forecast to cut interest rates in the coming months as growth and inflation cool across the region. Chile and Brazil have already started cutting interest rates, and Peru and Colombia are forecast to follow suit before the end of the year.
Peru entered a recession in the second quarter, its statistics agency said earlier on Tuesday.
Colombia’s policymakers raised interest rates by 11.5 percentage points in the year and half through April, to 13.25%. That curbed consumer demand, one of the recent growth engines.
The central bank forecasts an expansion of less than 1% this year, from 7.3% in 2022.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.