Colombia Monetary Policy


Colombia: Central Bank cuts rates again in December

December 21, 2012

At its latest monetary policy meeting on 21 December, the Central Bank (BanRep) cut the reference interest rate by 25 basis points to 4.25%. The decision surprised most market analysts, which had widely expected the Bank to remain on hold. With this move the Central Bank has cut interest rates in the last two meetings.

According to BanRep, the Colombian economy is growing below its potential, mainly reflecting a sharp slowdown in investment, and the Bank projects the economy to have expanded below 4% in 2012. Regarding price developments, the Central Bank stated that both current inflation as well as inflation expectations remain below the Bank's target. Monetary authorities added that uncertainty in the global economy persists despite a recent improvement in economic data.

For 2013, BanRep expects that some factors that dragged down investment in 2012 will be upturned, boosting domestic demand and driving economic growth above the projected figure for 2012. Meanwhile, inflation is expected to remain subdued this year.

The Central Bank set an inflation target of 3% for this year, with a tolerance margin of plus/minus 1.0 percentage points.


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