06:28 AM EST, 12/23/2024 (MT Newswires) -- The Board of Colombia's central bank (BanRep) Friday surprised economists and markets with a 25bps cut to its monetary policy rate, bringing it to 9.50%, noted Scotiabank.

Five members voted for a 25bps cut, one member for 50bps, and another for 75bps. In the policy statement, the Board emphasized that inflation will continue falling but more slowly amid recent foreign exchange pressures in the context of tighter financial conditions abroad and fiscal uncertainty domestically, said the bank.

Friday's action is a strong message of independence by the central bank, Scotiabank said.

The next meeting is on Jan. 31, when the central bank's staff will also carry out a quarterly update of BanRep's macroeconomic scenario. Before Friday's decision, Scotiabank had expected BanRep to roll out another 50bps move in early 2025, but given last week's events, the bank now thinks that officials will opt for another 25bps move.

In February, two BanRep board members are due to be replaced with their first rate decision coming in March -- the second of the year. Despite Minister Guevara's insistence that he will pursue a 75bps cut in coming meetings, Scotiabank believes the likelihood of this is low. In the most optimistic scenario, an acceleration back to 50bps per meeting could take place.

Before Friday's meeting, the bank projected a 6.75% end-2025 BanRep rate, which would still be within reach for the board were it to accelerate cuts at some point next year. Nevertheless, Scotiabank's projection is now tilted towards a higher BanRep rate at end-2025.