(Bloomberg) -- Colombia’s central bank lowered its key interest rate by half a percentage point to 11.75%, defying calls from the government for a deeper cut to boost economic growth. 

Five of the seven-member board backed the decision, Governor Leonardo Villar told reporters in Bogota. One argued for a deeper reduction, of three quarters of a percentage point, while another called for a full percentage point cut. 

All 23 economists in a Bloomberg survey correctly forecast the move.

“With today’s decision, the board continues with interest rate cuts which boost growth, while at the same time maintaining a policy stance in line with reducing inflation to its target by mid-2025,” Villar said.  

Colombia has the highest interest rates among Latin America’s major inflation-targeting economies even after reductions in December, January, March and April. Villar said this month that the bank wants to ease policy at a speed that doesn’t surprise markets or spark destabilizing outflows of capital.

Finance Minister Ricardo Bonilla, a voting member of the bank’s board, has repeatedly called for faster cuts to revive weak economic growth. The bank raised its estimate for economic growth this year to 1.4% from 0.8%, but cut its 2025 forecast to 3.2% from 3.5%. 

Read more: Colombia’s Top Central Banker Signals Rate Cuts But No Surprises

Inflation Fight

However, leading indicators such as retail sales, manufacturing output and economic activity, beat expectations in February, easing concerns about the economy’s weakness.

Inflation slowed for a 12th straight month in March, to 7.4%. The bank’s own forecasts show it overshooting the 2% to 4% target range for a fourth straight year in 2024. 

The inflation fight is being helped by the world’s biggest currency rally, which has seen the peso gain 20% against the dollar over the last year.

--With assistance from Rafael Gayol.

(Updates with bank’s revised GDP forecast in sixth paragraph.)

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