Colombia Monetary Policy


Central Bank cuts rates and bolsters dollar purchases

At its latest monetary policy meeting on 28 January, the Central Bank (BanRep) cut the reference interest rate by 25 basis points to 4.00%, in a decision expected by the market. With this move, the Central Bank has cut interest rates in its last three meetings and now the policy rate sits at its lowest level since May 2011.

According to BanRep, private consumption moderated in the last quarter of 2012, while investment likely deteriorated. In addition, exports decelerated at a fastest pace than imports in the same period. For this year, the Bank sees the economy growing below its potential, mainly due to a weaker performance in investment, while global demand will remain subdued despite improving prospects for the Euro area. Regarding price developments, the Central Bank stated that both current inflation as well as inflation expectations remain below the Bank's target.

In a separate decision, BanRep decided to increase its daily dollar purchases to at least USD 30 million with the aim of accumulating at least USD 3 billion between February and May.

The Central Bank set an inflation target of 3% for this year, with a tolerance margin of plus/minus 1.0 percentage points.

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Colombia Monetary Policy Chart

Colombia Monetary Policy January 2013

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

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