Colombia: Central Bank decides to leave reference rate on hold again
July 24, 2015
The Central Bank (BanRep) decided to keep the reference interest rate unchanged at 4.50% at its 24 June monetary policy meeting. The decision was in line with market expectations and represented the eleventh consecutive meeting at which BanRep kept the rate on hold.
In its accompanying statement, BanRep commented that data from the first semester of 2015 indicated moderate growth in the United States, while the Eurozone and Japan continued to recover slowly. In addition, China’s slowdown has been sharper than expected. Finally, the Latin American countries’ output remains subdued as GDP growth in the biggest economies was low or negative.
Regarding the domestic economy, BanRep commented that, “economic growth in Colombia for the second quarter of 2015 would be similar to the one registered for the first quarter, considering the data from retail trade, the indicators of confidence of consumers and of retailers, as well as the information regarding economic expectations, imports and the evolution of the external demand for national goods and services. For all of 2015, the most likely growth figure was revised downward, from 3.2% to 2.8%, within a range of 1.8% and 3.4%.”
Regarding price developments, BanRep pointed out that inflation had remained relatively stable in June. The main factors that are influencing subdued inflationary pressures are a softer dynamics in food supply, the decrease in international oil prices as well as prices for other commodities exported by local producers, and the significant depreciation of the Colombian peso. Conversely, costs of imported raw materials have been increasing.
Against this backdrop, the Bank decided that the current level of the reference interest rate is adequate. The next policy meeting is scheduled for 21 August.
Author: Eric Denis , Economist