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Colombia Monetary Policy April 2019

Colombia: Central Bank holds rate in April meeting

In a unanimous decision, Colombia’s Central Bank (Banco de la República, BanRep) kept the benchmark interest rate at 4.25% at its latest Board of Directors meeting on 26 April. The rate has been held at the current level since 27 April 2018, when the rate was cut by 25 basis points. The decision was in line with market expectations.

The Bank kept the rate steady amid relatively muted price pressures, largely stable inflation expectations and excess production capacity. Inflation edged up to 3.2% in March on a weaker peso (February: 3.0%), but remained within the Bank’s 2.0%–4.0% target band. While the Bank’s focus at the year’s outset was uncertainty over the pace of economic recovery, it has now shifted to economic slack and specifically how rapidly it will decline, giving the Bank room to maintain its expansionary stance. Growth should climb this year on an improvement in the external sector, while also being supported by solid domestic demand dynamics.

Little forward guidance was offered in the Bank’s accompanying statement, beyond reiterating that the trajectory of inflation will be closely monitored in the context of global developments. Central Bank Governor Juan José Echavarría, however, did signal in a press conference that the rate will be kept stable for most of the year. The majority of panelists expect a rate hike in the second half of the year, as price pressures are expected to pick up.

The next monetary policy meeting will be held on 28 June.

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