Colombia Monetary Policy


Central Bank raises rates again

At its 24 February monetary policy meeting, the Central Bank raised the reference interest rate by 25 basis points to 5.25%, in a decision that was expected by a majority of market analysts. The decision follows on another 25 basis-point rate hike implemented in January. The Central Bank stated that the Colombian economy continued to expand at a strong pace at the end of 2011 and into the start of this year, while adding that both exports and credit are increasing strongly. According to the Bank, the recent interest rate hikes should help inflation expectations converge towards the Central Bank's target range. Monetary authorities reiterated that the main downward risk to their growth outlook continues to be a disorderly default in Europe, which would greatly increase risk aversion and cause the world economy to slow down considerably, thus affecting the Colombian economy adversely. The Central Bank maintains its inflation target for 2012 unchanged at 3%, with a tolerance margin of 1.0 percentage points.


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