Colombia Monetary Policy


Central Bank stays put in March

At its latest monetary policy meeting on 23 March, the Central Bank left the reference interest rate unchanged at 5.25%, in a decision that had divided market analysts. The decision follows on two 25-basis point rate hikes implemented in January and February. The Central Bank stated that inflation has continued along the declining trend initiated in October, with core inflation remaining close to the Bank's target, which has prompted inflation expectations to moderate. Monetary authorities added that GDP figures for the last quarter of 2011 corroborate that the Colombian economy continued to expand at a robust pace but that recent indicators suggest that economic growth will likely moderate somewhat this year. According to the Bank, the recent interest rate hikes should help inflation expectations converge into 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, although they now recognize that such risks have diminished in recent weeks. 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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