Colombia Monetary Sector


Central Bank maintains key policy rate unchanged for fourth consecutive month

At its latest monetary policy meeting on 26 July, the Central Bank (BanRep) kept its reference interest rate at 3.25%, a decision widely expected by LatinFocus Consensus Forecast panellists. The key policy rate has remained on hold since March and currently sits at its lowest point since February 2011.

BanRep stated that, while economic activity remains depressed in the Euro area, Japan is experiencing a healthy recovery and private consumption is strengthening in the United States. As in other emerging economies, the Colombian peso weakened and bond yields increased in May and June, but the Central Bank noted that this trend was partially reversed in July. BanRep expressed a more positive view about the country's economic prospects, expecting GDP to have performed between 2.5% and 4.0% in the second quarter; 3.4% is expected to be the most likely outcome (Q1: +2.8% year-on-year). The second quarter improvement was mainly attributable to an acceleration in private consumption and stronger exports, particularly due to higher oil prices.

Regarding price developments, the Central Bank stated that both current inflation and inflation expectations remain anchored around its target of 3%, with a tolerance margin of plus/minus 1.0 percentage points.

LatinFocus Consensus Forecast panellists see the policy rate at 3.31% by the end of 2013. For next year, panellists expect the policy rate to end the year at 4.41%.

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