Colombia Monetary Policy


Central Bank raises interest rates as inflation tops Central Bank target

At its 25 November monetary policy meeting, the Central Bank lifted its reference interest rate for the first time since July. The Bank raised the rate by 25 basis points to 4.75%, as had been expected by the market. The Central Bank cited risks of financial imbalances and higher inflation, which had recently exceeded the upper limit of the Central Bank's target of 3% with a tolerance margin of 1.0 percentage points, as the main driving factors behind its decision to raise rates. Moreover, the Central Bank affirmed that domestic demand remains buoyant and that bank credit continues to growth. On the external front, the Bank stated that Europe's reforms, which were introduced to tackle problems on public debt, have not had their expected impact, while economic growth has moderated in the largest emerging economies. The Bank stated that it will react quickly if risks of a disorderly adjustment in Europe materialize, indicating its willingness to loosen policy again if the global economy deteriorates. The next monetary policy meeting is scheduled for 16 December. Meanwhile, the Central Bank left its inflation target for 2012 at 3% with a tolerance margin of 1.0 percentage points.

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