Colombia central bank cuts benchmark interest rate to 11.25%

By Nelson Bocanegra and Carlos Vargas

BOGOTA (Reuters) - Colombia's central bank cut the benchmark interest rate by 50 basis points to 11.25% on Friday, its fifth cut since December, as policymakers looked to boost the economy while keeping a tight grip on inflation.

The decision was backed by a majority of the board and was in line with a recent Reuters poll, where 25 analysts unanimously forecast the bank would cut its benchmark interest rate by half a percentage point to take it to its lowest level since October 2022.

While the board is formed of seven members, just six voted on Friday. Four of the members backed the decision to cut the rate by 50 basis points, while two members called for a reduction of 75 basis points.

"The risk premiums for the country and the exchange rate of the peso against the dollar have increased, in a context in which international financial conditions remain restrictive," bank board chief Leonardo Villar said, reading the board's statement.

However, such a cut would still leave the benchmark rate higher than inflation, which ended the 12-months through May 31 at 7.16%, above the bank's long-term target of 3%.

Following the cut, total cuts by the board to the central bank's benchmark rate amount to 200 basis points.

(Reporting by Nelson Bocanegra and Carlos Vargas; Writing by Oliver Griffin; Editing by Aurora Ellis and Sandra Maler)

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