Colombia Monetary Policy


Central Bank cuts rates again amid slower economic activity

At its latest monetary policy meeting on 22 February, the Central Bank (BanRep) cut the reference interest rate by 25 basis points to 3.75%, in a decision widely anticipated by LatinFocus Consensus Forecast panellists. With this move, the Central Bank has cut interest rates in its last four meetings and the policy rate now sits at its lowest level since May 2011.

BanRep explained its decision by stating that the Colombian economy is growing below potential owing to weak economic growth abroad. That said, the Bank acknowledged that some major economies have recovered some steam at the outset of the year. Domestically, BanRep sees private consumption moderating, while investment prospects remaining uncertain. The Central Bank expects the economy to have expanded between 3.3% and 3.9% in 2012.

Regarding price developments, the Central Bank stated that both current inflation as well as inflation expectations remain below the Bank's target of 3%, with a tolerance margin of plus/minus 1.0 percentage points. Going forward, the Bank sees inflationary pressures remaining low. The next policy meeting is scheduled for 22 March.

LatinFocus Consensus Forecast panellists see the policy rate at 3.97% by the end of 2013. For next year, panellists expect the policy rate to end the year at 4.84%.

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Colombia Monetary Policy Chart

Colombia Monetary Policy February 2013

Note: Central Bank policy rate in %, eop.
Source: Colombia Central Bank.

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