By Nelson Bocanegra
BOGOTA (Reuters) - Colombia's central bank will cut its benchmark interest rate by 50 basis points to a historic low of 2.75% at its meeting next week, as it tries to alleviate financial upheaval caused by the coronavirus pandemic, a Reuters poll showed on Thursday.
It would mark the third consecutive month that the seven-member board has reduced borrowing costs by half a percentage point, after holding it steady for nearly two years.
Sixteen of 20 analysts surveyed projected a cut of 50 points, while two anticipated a reduction of 25 points to 3%, one a cut of 100 points and another forecast no change.
The board had been voting on the interest rate eight times a year, but has returned to voting monthly during the pandemic and its economic fall-out. May would not usually be a month with a rate decision.
"The strong deterioration in activity and the reduction to inflation estimates give space for action by the central bank," said Carolina Monzon, economist for Colombia at Itau.
Board chief Juan Jose Echavarria has said the current economic situation could lead to a fall in inflation to below the long-term 3% target. Echavarria has also said that though the bank may continue rate cuts they are unlikely to have an immediate effect on the economy.
The majority of analysts said the bank is likely to continue cuts of 25 or 50 points during the remainder of the year.
"It could mean that they make additional cuts in the rate gradually and that risks mean they are inclined to implement new cuts in the second half," said Joel Virgen, chief economist for Mexico and Colombia at BNP Paribas (OTC:BNPQY).