Colombia Monetary Policy

Colombia

Colombia: Central Bank cuts interest rates for first time since 2010

July 28, 2012

At its latest monetary policy meeting on 27 July, the Central Bank (BanRep) cut the reference interest rate by 25 basis points to 5.00%, in a unanimous decision that surprised most market analysts. The move marks the first interest rate cut in two years and partly reverses the two 25-basis point rate hikes implemented in January and February. According to the Bank, the global slowdown is affecting the Colombian economy through a reduction in external demand as well as via lower prices for export products. Monetary authorities stated that this situation will continue in the coming quarters, and expect that consumption and investment will be the main drivers of economic growth going forward. Regarding price developments, the Central Bank stated that inflation in June came in below the Bank's forecasts and that inflation expectations remain slightly above 3.0%. Monetary authorities added that the level of credit is moderating but remains high. Against this backdrop, BanRep lowered its growth forecasts and now projects economic growth to range between 3.0% and 5.0% this year (previously: 4.0%-6.0%). For next year, the Central Bank expects growth to be "similar" to the one recorded in 2012. The Central Bank maintains its core inflation target for 2012 unchanged at 3%, with a tolerance margin of


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Colombia Monetary Policy July 2012

Note: Central Bank policy rate in %, eop.
Source: Colombia Central Bank.


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