BOGOTA (Reuters) - Colombia's central bank board cut the benchmark interest rate by 50 basis points to a historic low of 2.75% on Friday, as policymakers continue trying to stoke the economy ahead of a predicted recession.
The decision was backed by five of seven board members, the board said in a statement. The two dissenting members backed a cut of 25%.
"We are responding to the drop in inflation and its estimates, to falling growth, to rising unemployment, to what the country is experiencing in this terrible pandemic," board chief Juan Jose Echavarria said during a virtual press conference, adding there is debate about how far cuts should go.
The board has cut the rate for three consecutive months, after holding it steady for nearly two years.
The voting tallied with predictions by analysts in a Reuters survey, a majority of whom expected a cut of 50 basis points, while a minority predicted cuts of other amounts.
Colombia started a national quarantine in late March. While restrictions on many sectors have begun to relax, the quarantine is set to continue until July 1.
The Andean country's economy will contract by 5.5% this year, the finance ministry predicts.
Unemployment numbers spiked in April. The urban jobless rate was up to 23.5%, from 11.1% in the same month of 2019, while the national rate was 19.8%, nearly double the 10.3% recorded a year earlier.
Economic growth - which was 1.1% year-on-year in the first quarter - will likely be worse in the second quarter, Echavarria said.
"We expect this second quarter will be the worst of all and that conditions will begin to improve little by little as time passes," Echavarria said.
Analysts expect the bank to continue lowering the rate for the rest of the year. Echavarria did not rule out the possibility of negative rates, but said he did not favor them.