Colombia Monetary Policy


Central Bank eases aggressively by cutting 50 basis points

At its latest monetary policy meeting on 22 March, the Central Bank (BanRep) lowered the reference interest rate by 50 basis points to 3.25%. The decision caught analysts by surprise as most of LatinFocus Consensus Forecast panellists had expected a 25 basis-point reduction. With this move, the Central Bank has cut interest rates in its last five meetings and the policy rate now sits at its lowest level since February 2011.

BanRep acknowledged that economic growth in Colombia's main trading partners is lower than previously expected, thereby dragging down the contribution from the external sector. In addition, the Bank stated that domestic economic growth continues to show signs of weakening and that forward-looking indicators suggest less dynamic private consumption.

Regarding price developments, the Central Bank stated that both current inflation as well as inflation expectations remain well anchored 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 26 April.

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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