Colombia: Central Bank cuts rates unexpectedly
November 23, 2012
At its latest monetary policy meeting on 23 November, the Central Bank (BanRep) cut reference interest rate by 25 basis points to 4.50%, in a decision that surprised most market analysts, which had widely expected the Bank to remain on hold. According to the BanRep, uncertainty in the global economy persists despite a recent improvement in economic data. At a domestic level, the Bank explained that the Colombian economy has slowed down in the second half of the year, mainly reflecting a moderation in exports and a contraction in industrial production. That said, the Bank added that it expects economic growth to be close to its potential in 2013, supported by low interest rates, stable employment levels and positive consumer sentiment. Regarding price developments, the Central Bank stated that both current inflation as well as inflation expectations remain very close to the Bank's target. Monetary authorities added that the level of credit continues to moderate, but warned that home prices are at historically high levels.